Oil / Commodities - Oil tumbled toward $100 a barrel as China’s spreading virus outbreak continued to weigh on the outlook for global demand. WTI futures declined 1.5% after closing marginally higher Wednesday following a choppy session. Hangzhou is the latest Chinese city to be added to a growing list of regions required for mass virus testing, while the nation’s top state-run oil processor said during an earnings call that the resurgence was slowing fuel demand. There are some signs that the outbreak is easing but lockdowns have led to stockpiles swelling up in China. The oil market continues to be torn between a bullish supply outlook and a bearish demand picture. Supply risks around Russian oil are longer term in nature compared to the COVID-related demand hit in China. As a result, it is likely oil prices will remain well supported. Russia’s finance minister said the nation’s oil output may drop by as much as 17% this year as buyers shun its crude. The U.S. and U.K. are banning imports from the OPEC+ producer, while the EU is devising a plan to take similar steps. Brent remains narrowly backwardated after nearing a bearish contango structure Tuesday. The global benchmark’s prompt timespread was 37 cents a barrel in backwardation, compared to as high as $5.88 in early March just after the Russian invasion of Ukraine. The fuel market has also tightened as Europe relies more on U.S. imports to avoid Russian supply. American supplies of distillates, including diesel, dropped for a third week and are at the lowest since 2008. Gasoline stockpiles also fell for a fourth consecutive week. The U.S. East Coast is bearing the brunt of the tightness in part because shrinking refining capacity has led to increased reliance on U.S. Gulf Coast shipments. However, Gulf Coast processors are instead exporting more fuel as a premium as buyers in Latin America and Europe race to replace Russian supply.
Newsletter - April 28, 2022
Newsletter - April 28, 2022
Newsletter - April 28, 2022
Oil / Commodities - Oil tumbled toward $100 a barrel as China’s spreading virus outbreak continued to weigh on the outlook for global demand. WTI futures declined 1.5% after closing marginally higher Wednesday following a choppy session. Hangzhou is the latest Chinese city to be added to a growing list of regions required for mass virus testing, while the nation’s top state-run oil processor said during an earnings call that the resurgence was slowing fuel demand. There are some signs that the outbreak is easing but lockdowns have led to stockpiles swelling up in China. The oil market continues to be torn between a bullish supply outlook and a bearish demand picture. Supply risks around Russian oil are longer term in nature compared to the COVID-related demand hit in China. As a result, it is likely oil prices will remain well supported. Russia’s finance minister said the nation’s oil output may drop by as much as 17% this year as buyers shun its crude. The U.S. and U.K. are banning imports from the OPEC+ producer, while the EU is devising a plan to take similar steps. Brent remains narrowly backwardated after nearing a bearish contango structure Tuesday. The global benchmark’s prompt timespread was 37 cents a barrel in backwardation, compared to as high as $5.88 in early March just after the Russian invasion of Ukraine. The fuel market has also tightened as Europe relies more on U.S. imports to avoid Russian supply. American supplies of distillates, including diesel, dropped for a third week and are at the lowest since 2008. Gasoline stockpiles also fell for a fourth consecutive week. The U.S. East Coast is bearing the brunt of the tightness in part because shrinking refining capacity has led to increased reliance on U.S. Gulf Coast shipments. However, Gulf Coast processors are instead exporting more fuel as a premium as buyers in Latin America and Europe race to replace Russian supply.