Oil Continues Fall Back on US Recession Concerns

Oil prices fell again yesterday as fears that high inflation and central bank tightening will lead to lower oil demand. Fed Chair Powell said that there was a possibility of a US recession. In volatile trading yesterday Brent lost further ground and has now fallen about 25$/bbl since a peak at 125$/bbl on 14^th June.

• Brent AUG 22 down -1.1% at 110.48$/bbl
• WTI AUG 22 down -1.4% at 104.72$/bbl
• Gasoil JUL 22 up 1.9% at 1308.75$/mt
• WTI-Brent down -0.32$/bbl at -5.77$/bbl
• Despite the concerns for future demand there are still issues with supply. OPEC members continue to struggle meeting production quotas and Saudia Arabia and UAE wouldn’t be able to independently raise output until the end of the existing OPEC agreement at year end. Even if they did raise output, the draw down on the limited spare capacity may actually push up longer term prices with little buffer to cover for future supply issues.
• The tight supply side is keeping the time spreads high and the curves strongly backwardated although spreads have eased as the flat price has fallen.
• Brent AUG 22-SEP 22 down -0.05$/bbl at 3.04$/bbl
• Brent DEC 22-DEC 23 down -0.31$/bbl at 11.36$/bbl

• Refined product spreads to crude remain bullish with low stock levels and limited refining capacity trying to keep up with post pandemic demand recovery. US President Biden is planning to suspend the federal gasoline tax of 18.4c/gal for three months in an effort to ease the fuel pump pressure on consumers. US Energy Secretary is also due to meet 7 oil company officials today in an effort to try to increase oil output.
• US gasoline crack up 1.1$/bbl at 50.83$/bbl
• US ULSD crack up 1.3$/bbl at 74.46$/bbl