Recap: On Wednesday, the oil market posted an outside trading day as the market weighed the supply cuts announced earlier this week by Saudi Arabia and Russia against the concerns over the global economy. The market traded mostly sideways during Tuesday’s short trading session before it sold off to a low of $69.90 in overnight trading. Given there was no settlement on Tuesday because of the Independence Day holiday, trading on Wednesday appeared to narrow the spread between Brent and WTI, with WTI catching up with Brent’s gains the previous day. Early in the session, the market seems to have come under pressure again due to concerns over a slowdown in the global economy and future interest rate increases in the U.S. and Europe. A private sector survey showed China’s services activity expanded at the slowest pace in five months in June. However, the oil market bounced off its lows and never looked back as it rallied to a high of $72.17 on the additional supply cuts announced this week and ahead of the weekly petroleum stock reports. The August WTI contract settled up $2.00 at $71.79 and the September Brent contract settled up 40 cents at $76.65. The product markets were also well supported, with the heating oil market settling up 1.16 cents at $2.4933 and the RB market settling up 5.59 cents at $2.5183.
Market Analysis: The oil market on Thursday will seek further direction from the weekly petroleum stocks reports due later on Wednesday and Thursday morning, which are expected to show draws in crude stocks of 1 million barrels on the week. The market is seen finding resistance at its high of $72.12, $72.65, $72.72, $73.37, $75.70 and $76.93. Meanwhile, support is seen at $71.00, $69.90, $69.69, $69.53, $68.93, $67.05 and $66.96.
Fundamental News: In a statement, OPEC said its ministers met on the sidelines of the 8th OPEC seminar in Vienna where they reviewed the market conditions and agreed to continue consultation with their non-OPEC counterparts, in their continued efforts to support a stable and balanced oil market.
Saudi Energy Minister, Prince Abdulaziz bin Salman, said new joint oil output cuts agreed by Russia and Saudi Arabia earlier this week have again proven sceptics wrong about Saudi-Russian energy relations. He said OPEC+ will do whatever necessary to support the market. He also said IEA data anomalies create market distortions.
The United Arab Emirates' Energy Minister, Suhail Al Mazrouei, said additional oil output and export cuts made by Saudi Arabia and Russia earlier this week should be enough to help balance the oil market.
Kuwait’s Oil Minister said that his country hopes to have a higher oil production quota when it ramps up capacity and Kuwait remains committed to OPEC decisions. The minister also said his country hopes to reach 3.2 million bpd of production capacity before the end of 2024.
Morgan Stanley said it expects Brent prices to moderate towards $70/barrel as the market’s focus shifts from the second half of 2023 stock draws to the first half of 2024 stock builds. Morgan Stanley lowered its oil price forecasts, predicting a market surplus in the first half of 2024 with non-OPEC supply growing faster than demand next year. The bank cut its Brent price outlook for the third quarter this year to $75/barrel from $77.50/barrel and lowered its fourth quarter forecast to $70/barrel from $75/barrel. It also cut its forecasts for 2024 by $5, and now sees prices at $70/barrel in the first quarter, at $72.50/barrel in the second, and at $75/barrel and $80/barrel for the final two quarters, respectively.
IIR Energy reported that U.S. oil refiners are expected to shut in about 129,000 bpd of capacity in the week ending July 7th, increasing available refining capacity by 915,000 bpd.
Early Market Call - as of 8:25 AM EDT
WTI - August $71.37 down 42 cents per barrel
RBOB - August $2.5013 down 1.70 cents per gallon
HO - August $2.4696 down 2.37 cents per gallon
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.