OIL: Crude Holds Gains Amid Tighter Supply Expectations

Crude prices are stable today after a rally yesterday to the highest since May 29 at $84.55/bbl amid better risk sentiment as equities and other commodities rise. Crude broke the 200-day moving average as outlooks expected crude balances to tighten and the summer driving season ticks higher.

• The demand outlook remains uncertain with mixed data in China and a drop in refinery output by 1.8% y/y in May amid maintenance and weak margins.
• OPEC’s management of supply will keep the H2 average of Brent between $80 and $85/bbl, according to Commonwealth Bank of Australia cited by Bloomberg. Goldman Sachs see Brent to an August peak of $86/bbl amid a summer deficit. 
• Oil product tanks at a storage facility in Russia’s southern Rostov region caught fire after another drone attack.
  • Brent AUG 24 down 0.2% at 84.12$/bbl
  • WTI JUL 24 down 0.2% at 80.19$/bbl
  • Brent AUG 24-SEP 24 up 0.01$/bbl at 0.74$/bbl
  • Brent DEC 24-DEC 25 down 0.11$/bbl at 4.88$/bbl
• The expectation of tight supply in Q3 is supporting the curve backwardation with the prompt Brent spread back up to $0.75/bbl from almost at parity immediately following the OPEC meeting at the start of the month. 
• US and European diesel margins fell back yesterday to reverse much of the gains seen late last week although remain net higher on the month. Tighter diesel supplies are supportive with Middle East flows headed to Asia over European while China exports look fairly weak.
  • US gasoline crack up 0.3$/bbl at 22.54$/bbl
  • US ULSD crack up 0.2$/bbl at 24.09$/bbl