Markets Balance Weak Demand Against Ongoing Supply Uncertainty

Crude is edging higher after a week of loses from economic demand concerns, a stronger dollar and due to China’s Covid Zero policy.

• Brent NOV 22 up 0.3% at 89.43$/bbl
• WTI OCT 22 up 0.2% at 83.67$/bbl
• Gasoil SEP 22 down -0.1% at 1074.25$/mt
• WTI-Brent down -0.06$/bbl at -6.22$/bbl
• EIA data released yesterday saw an unexpected large build in crude, but refined product demand remains a concern with little signs of recovery and levels still near 2020 levels.
• Upside supply risks still have the potential to drive prices higher especially with uncertainty over future Russian supply. Although Russian supply has remained unexpectedly resilient since March, the EU ban from Dec 5 and the possible G7 oil price cap could limit potential buyers. US officials have not ruled out an additional release from SPR reserves if prices surge later in the year following the completion of the current release in November.
  • Brent NOV 22-DEC 22 up 0.08$/bbl at 0.98$/bbl
  • Brent DEC 22-DEC 23 unchanged at 8.39$/bbl
• The supply uncertainty from Russia, OPEC, Libya, and Iran are keeping the forward curve in backwardation with time spreads steady today but slightly softer on the week.
  • US 321 crack down -0.4$/bbl at 31.34$/bbl
  • US gasoline crack down -0.5$/bbl at 14.52$/bbl
  • US ULSD crack down -1.1$/bbl at 64.48$/bbl
• Gasoline and diesel crack spreads have remained stable all week as low supplies and stock levels are weighed against the ongoing weakness in demand data. EIA, OPIS and GasBuddy data has highlighted weakness in gasoline demand over the summer.