Higher In Asia On Supply Worry; WTI-Brent Spread Widens

WTI is ~+$1.60 and Brent is ~+$1.80, with the latter unwinding virtually all of last Friday’s steep, recession worry-inspired selloff in crude. Familiar debate re: tightness in crude supplies vs. demand destruction continues to do the rounds, with participants likely eyeing the upcoming FOMC over the potential impact to energy demand from the Fed’s rate hikes.

• Looking at the supply side of things, an Argus Media source report has pointed to OPEC+ producing ~2.84mn bpd below production targets for June (after the group reported falling short by ~2.7mn bpd for May), pointing to deepening production woes in the bloc.
• Brent’s prompt spread sits a little under fresh cycle highs (when discounting recent month-end, expiry-related volatility) at ~$5.05, on track to rise for a eight session in nine, reflecting rising worry re: tightness in near-term crude supplies.
• Elsewhere, Libya has announced that crude output has risen to a “little over” 1mn bpd, approaching pre-crisis levels of 1.2mn bpd.
• On the demand side of the equation, a survey by the U.S. AAA has shown over half of respondents driving less amidst higher gasoline prices (also coming after last week’s EIA inventory data showed a large, surprise build in gasoline stockpiles). The WTI-Brent spread has accordingly widened to ~$8.60, the widest since Jun ‘19, reflecting expectations of weaker U.S. oil demand.