Oil Mid-Day Summary: Crude Slides

Crude prices ticked higher in the morning after China’s unexpected rate cut announcement with the 1-year MTF reduced to 2.5% from 2.65%. The rate cut preceded data showing relatively robust commodities output in July. Crude markets removed earlier gains amid the ongoing risks to China’s economic growth and overall strength of the US Dollar.

• Brent OCT 23 down -0.8% at 85.56$/bbl
• WTI SEP 23 down -1% at 81.69$/bbl
• China’s apparent oil demand in July was up 21.2% yr/yr according to Bloomberg with a 17.4% increase yr/yr in oil processing.
• Crude curve backwardation remained strong with the prompt Brent spread setting new recent highs late yesterday amid tight supply concerns mainly driven by the extended Saudi and Russia supply cuts.
• Brent OCT 23-NOV 23 down -0.06$/bbl at 0.64$/bbl
• Brent DEC 23-DEC 24 down -0.25$/bbl at 4.69$/bbl
• Oil output in the major US shale oil basins is forecast to fall by 20kbpd to 9.415mbpd in September according to the EIA drilling productivity report. The August output forecast was revised up from 9.397mbpd to 9.435mbpd.
• Crude inventories in the US SPR rose by 600kbbls last week. Total inventories were up to 348.4mbbl on Aug 11 from 347.8mbbl the previous week.
• Kazakhstan’s daily oil production fell further to 209.3k tons on Aug. 14 compared with 215k tons the day before because of a power outage.
• The Aframax tanker Lucia discharged a cargo of Russian Ural’s crude via ship-to-ship transfer in the at the Spanish enclave of Ceuta - the first in four months.
• Goldman Sachs MEMA economist Farouk Soussa said: “the link between oil prices and the GCC fiscal outlook remains pretty robust, higher oil prices obviously mean higher oil revenues for the GCC countries, every $10/bbl rise, more or less means another 1-1.5% GDP in extra oil revenues for the GCC countries.”
• China's independent refineries imported around 6.28 million mt of Iranian crudes in July, up 13% from June and the highest so far this year, while Russian crude is losing attractiveness amid higher prices.
• Refinery throughput in China rose 17.4% on the year in July, according to Reuters, as refiners maintain output to meet summer travel demand.
• Diesel and gasoline cracks are holding steady today after a small decline yesterday with demand concerns limiting upside despite ongoing tight supplies and low global inventories. The latest API US stock data is due for release later today.
• US gasoline crack up 0.7$/bbl at 40.14$/bbl
• US ULSD crack up 1$/bbl at 47.78$/bbl
• Chicago’s West Shore/Badger RBOB was pricing at $3.26/USG on Friday, the highest since Nov. 2 according to Argus.
• Brazil is pulling in more diesel volumes from its prior main supplier the US this month as flows from Russia slip. Russia-Brazil diesel flows are at 110k b/d so far this month vs 204k b/d for all of July.