Recap: Crude oil prices rose at the start of Monday’s session after Saudi Arabia said Sunday it would raise its oil prices for most regions, excluding the United States. The increase in prices was the biggest for Asian buyers, with the flagship Arab Light set to sell for $2.10 per barrel more than it did this month, at $6.50 per barrel over the Oman/Dubai benchmarks. The wider opening of the spigots remains to materialize, as several analysts have noted. Some have noted that despite the fact that Saudi Arabia is one of the few OPEC members that have spare capacity, it may be wary of tapping it in any sizeable way right now. Meanwhile, demand, especially in Asia, is rising, as evidenced by the price move by Riyadh. August Brent topped $121 per barrel yet again, with July West Texas Intermediate close behind at over $120.99 per barrel. Oil prices pared gains as the U.S. dollar rallied, making denominated commodities less expensive. WTI for July delivery lost 37 cents per barrel, or 0.31% to $118.50. ICE Brent Crude for Aug. delivery lost 21 cents per barrel, or 0.18% to $119.51. July heating oil gained 7.98 cents per gallon, or 1.86% to $4.3601, while RBOB Gasoline for July delivery lost 5.92 cents per gallon, or 1.39% to $4.1930.
Technical Analysis: After gapping higher on the opening, oil prices pulled back to fill the gap. This market remains extraordinarily bullish and for that fact alone, we would continue to look for buyers below the market, as demand for China increases with the easing of COVID lockdowns. There are a lot of concerns about inflation, which is typically seen in the energy markets first. Resistance is seen at $126.85 and $130.50, with support set at $116.64 and $115.21.
Fundamental News: Barclays increased its Brent crude price forecasts by $11/barrel for 2022 and $23/barrel for 2023, citing a larger and sustained disruption in Russian supply following sanctions by the European Union. Barclays sees Brent prices averaging $111/barrel this year and next, while it sees U.S. WTI prices at $108/barrel for the same period. The bank said Russian oil output is expected to decline by 1.5 million bpd by the end of the year, adding it no longer expects inventories to normalize over the forecast period.
Citi Research increased its quarterly oil price forecasts for this year and its year-average outlook for 2023, because additional supply from Iran looked heavily delayed, adding to tighter market balances. Citi said a delay in Iran sanctions relief is the main factor tightening balances. The bank now factors in Iran sanctions relief beginning in the first quarter of next year, at first adding 500,000 bpd, then 1.3 million bpd over the second half. It previously expected Iran sanctions relief to add supply in mid-2022. Citing tighter market balances, Citi raised its second-quarter 2022 Brent price forecast by $14 to $113/barrel, and the third and fourth quarter prices by $12, to $99/barrels and $85/barrel, respectively. The bank estimates Brent to average $75/barrel in 2023, revised higher by $16.
Sources stated that Italy’s Eni SpA and Spain's Repsol SA could begin shipping Venezuelan oil to Europe as soon as next month to make up for Russian crude, resuming oil-for-debt swaps halted two years ago when Washington stepped up sanctions on Venezuela.
IIR Energy reported that U.S. oil refiners are expected to shut in about 433,000 bpd of capacity in the week ending June 10th, increasing available refining capacity by 207,000 bpd. Offline capacity is seen at 433,000 bpd in the week ending June 17th.
Early Market Call - as of 8:25 AM EDT
WTI - July $118.37, down 12 cents
RBOB - July $4.1281, down 6.49 cents
HO - July $4.3531, down 70 points
View the Sprague Refined Products Market Watch Report in a downloadable pdf format by clicking below.
Click to view more online:
Heating Oil Supplier
Diesel Supplier
View market updates
View our refined products glossary
Go to SpraguePORT online
This market update is provided for information purposes only and is not intended as advice on any transaction nor is it a solicitation to buy or sell commodities. Sprague makes no representations or warranties with respect to the contents of such news, including, without limitation, its accuracy and completeness, and Sprague shall not be responsible for the consequence of reliance upon any opinions, statements, projections and analyses presented herein or for any omission or error in fact. The views expressed in this material are through the period as of the date of this report and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance or results and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied, or transmitted or any of its contents disclosed to third parties without Sprague’s express written consent.