OIL: Crude Drifts Lower Amid Further China Demand Concerns

Crude markets are drifting lower with a general pullback in risk following China’s announcement of further policy support and with hope for progress in a ceasefire deal in the Middle East and despite further US stocks draws.

• Today’s unexpected China stimulus included a 20bp MLF cut and a 2000bn liquidity injection, which follows Monday’s 10bp reduction in key rates. China demand growth concerns has been weighing on markets and the monetary policy easing this week may be confirming those fears.
• The China Petroleum Planning and Engineering Institute estimates that gasoline demand will fall 3.2% y/y in H2 and diesel 6.4%, according to Bloomberg.
• EIA data yesterday showed the fourth consecutive weekly drop in US crude inventories to the lowest since February. Crude stocks drew slightly more than expected with a rise in exports and drop in imports offsetting a drop in refinery runs and ongoing production at 13.3mbpd. 
• The number of out-of-control wildfires in Alberta and British Columbia are increasing with fires greater than 10 hectares in size within 10km of around 389kb/d of oil production.  Fires are near key facilities such as the Trans Mountain Pipeline and more than a dozen are in Canada's key oil sands hub in the Fort McMurray region.
• Diesel and gasoline cracks have rallied following unexpected US stocks draws driven by a recovery in implied demand.
  • Brent SEP 24 down 0.7% at 81.12$/bbl
  • WTI SEP 24 down 0.8% at 76.98$/bbl
  • Brent SEP 24-OCT 24 up 0.02$/bbl at 0.91$/bbl
  • Brent DEC 24-DEC 25 down 0.17$/bbl at 3.87$/bbl
  • US gasoline crack up 0$/bbl at 23.57$/bbl
  • US ULSD crack up 0.2$/bbl at 26.08$/bbl