Oil Summary at European Close: Middle East Tensions Spark Crude Jump

Front month Brent futures are holding relatively steady and below the peak of nearly 89$/bbl seen earlier today but time spreads are approaching the highs from last week. Tight supply concerns and the risk to future supplies due to Middle East tensions are adding support despite no immediate impact on crude flows expected.

• Brent DEC 23 up 4.1% at 88.06$/bbl
• WTI NOV 23 up 4.3% at 86.37$/bbl
• There are reports that Iran was involved in the Hamas attack on Israel and reprisals on Iran could risk crude shipping through the Strait of Hormuz, which the state has previously warned it could close. Only recently the US eased sanctions on Iran to allow more oil shipments. Some analysts have reduced expectations that Saudi Arabia will ease the current voluntary production cuts.
• OPEC forecasts oil consumption will rise 16% over the next two decades to reach 116mn bpd in 2045 – a 6mn bpd rise over prior predictions, according to the 2023 OPEC World Oil Outlook.
• A collection of OPEC+ nations Bahrain, Iraq, Kuwait, Oman, Saudi Arabia and the United Arab Emirates stated their commitment to "collective and individual voluntary adjustments" towards oil production levels over the weekend.
• Goldman Sachs estimates Saudi Arabia’s crude production will stay flat at 9mbpd during 1Q24 – meaning an extension to voluntary cuts – before starting to rise by 0.25mbpd per quarter from 2Q24, the bank said in a note.
• US treasury Secretary Janet Yellen said the US is preparing to crack down on the G7 $60/bbl price cap evasion on Russian oil in a WSJ interview earlier - though comments with the news outlet were limited.
• Declining US rig count data is hiding potential productivity strength suggested by other oil field indicators according to Macquarie Group. Strength in drilling permits and labour activity data could indicate the supply chain catching up and/or improving efficiency.
• Turkey has yet to notify Iraq about whether the oil exports pipeline is ready to begin operations according to senior Iraqi officials speaking with Reuters.
• China released its fourth batch of crude oil import quotas for non-state-owned totalling 9.54m mt and below expectations, according to OilChem.