Demand Concern Balanced Against Tighter Supplies

Crude markets are falling back this morning after rallying 15% from 85.5$/bbl at the start of the month up to 98.5$/bbl on the cut in production targets announced by OPEC+ last week.

• Brent DEC 22 down -0.4% at 97.52$/bbl
• WTI NOV 22 down -0.4% at 92.24$/bbl
• Gasoil OCT 22 down -1.2% at 1243.25$/mt
• WTI-Brent down -0.05$/bbl at -6.52$/bbl
• The impact of the tighter supplies is weighed against the backdrop of oil demand growth concerns driven by recession fears and central bank tightening. The tighter supply situation is reflected in the time spreads with the Dec22-Dec23 just off from the highest since early July and the prompt spread near the highest since the end of August. The curve backwardation is following the flat price slightly lower this morning.
  • Brent DEC 22-JAN 23 down -0.06$/bbl at 1.97$/bbl
  • Brent DEC 22-DEC 23 down -0.3$/bbl at 13.23$/bbl
• China demand concern is adding to the market uncertainty as local restrictions continue to control covid outbreaks. It is unclear when China may start easing their zero covid policy and how their oil demand will recover. At the end of last month China released an extra 15m tons of oil product quotas to help boost their recovery.
  • US 321 crack down -1.2$/bbl at 39.47$/bbl
  • US gasoline crack down -0.6$/bbl at 21.66$/bbl
  • US ULSD crack down -1.4$/bbl at 75.05$/bbl
• Demand concerns are also weighing on crack spreads today with both gasoline and diesel drifting lower. High refinery outages due to maintenance and ongoing French strikes, and lower flows from Russia have kept supplies tight and supported prices recently. The Gasoil backwardation remains strong with the prompt spreads up at 103$/mt.