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Strong Crude Gains Kicked Off By China RRR Cut, Equity Gains

COMMODITIES
  • Crude front month futures have gained strongly today, with WTI surpassing $90/bbl for the first time since November. Prices were supported by the 25bp RRR cut in China, which countered the ECB’s dovish 25bp hike to 4%, along with some stronger than expected US data.
  • The strengthening crude curve backwardation highlights the tight supplies expected in Q4 amid low global inventories driven largely by the Saudi Arabia and Russia cuts until the end of the year.
  • A total of 587kbbls of open October 23 options positions on CME and ICE are due to expire against the October future close tomorrow. Current aggregate open interest is 271k calls and 316k puts.
  • Global oil demand will peak in approximately 2027 at just below 104mb/d with OECD oil demand never returning to pre-Covid-19 levels according to HBSC. Against that, consistent and data-based forecasts do not support the IEA assertion that fossil fuel demand would peak before 2030 according to a statement by OPEC.
  • WTI is +1.8% at $90.12, clearing yesterday’s $89.64 and then the psychological round $90 to open $92.17 (Nov 8, 2022 high cont).
  • Brent is +1.9% at $93.61, clearing $92.91 (Nov 17, 2022 high cont) to open $94.79 (Nov 16 high).
  • Gold is +0.05%, holding up well considering a solidly higher DXY index (a function of the ECB indicating potentially no further hikes ahead) as well as modestly higher Treasury yields.
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