Lack of Confidence OPEC can Reach Targets

In volatile trading Brent regained all previous day loses to finish back up at 117.61$/bbl. OPEC+ increased supply output but there is a lack of confidence that targets can actually be met. The EU approval of a partial ban on Russia oil and a large draw in EIA crude stocks helped push prices back up on the day.

• Brent AUG 22 down -0.1% at 117.45$/bbl
• WTI JUL 22 down -0.2% at 116.61$/bbl
• Gasoil JUN 22 up 2.3% at 1288$/mt
• WTI-Brent down -0.1$/bbl at -3.42$/bbl
• OPEC+ increased production for July and August by 648kbpd which effectively brings forward efforts to unwind all the coalitions remaining output cuts from September to August. Members have struggled to meet production targets over the last year and only Saudi Arabia and UAE have significant spare capacity so it seems unlikely they will be able to meet these new targets. Earlier rumours that Saudi and UAE were going to step in and cover Russia’s output shortfall failed to materialize.
• After further requests from Hungary, the EU sanctions on Russian oil were finally approved. The ban applies to seaborne Russian oil for crude delivered in six months and refined products in eight months. Pipeline imports will aim to be included at a later date if a solution can be found to secure supply and update infrastructure for those countries dependant on the supply.
• Crude markets remain strongly backwardated despite a slightly dip in spread levels over the last couple of days.
• Brent AUG 22-SEP 22 up 0.03$/bbl at 2.61$/bbl
• Brent DEC 22-DEC 23 up 0.04$/bbl at 15.13$/bbl