OfBusiness Petroleum Dailies | 19th July 2023

Price

• Global oil prices edged down on Wednesday, after opening higher at the start of Asian trade, as markets weighed U.S. demand concerns against China’s pledge to support economic growth, tighter Russian supply, and declining U.S. inventories.
• Brent futures slipped 22 cents to $79.41 a barrel at 0403 GMT, while U.S. West Texas Intermediate (WTI) crude fell 32 cents to $75.43 per barrel.

Demand and Supply

• Russia will reduce its oil exports by 2.1 million metric tons in the third quarter in line with planned voluntary export cuts of 500,000 barrels per day in August, according to the energy ministry.
• Abu Dhabi’s ADNOC Gas on Tuesday announced a 14-year $7 billion-$9 billion deal with Indian Oil Corp to supply 1.2 million metric tonnes of liquefied natural gas (LNG) per year, ADNOC said in a statement.
• Indian companies are spending billions of dollars to boost their gas infrastructure and are scouting for long-term LNG import deals as the country aims to raise the share of gas in its energy mix to 15% by 2030 from 6.2% currently.
• State-backed oil giant Abu Dhabi National Oil Co (ADNOC) has sharpened its focus on the gas market as competition for LNG has ramped up since the Russian invasion of Ukraine in February 2022, with Europe, in particular, needing large amounts to help replace gas piped from Russia.

News

• There are many positive drivers for oil prices now on the demand-supply front, and while we expect WTI to rebound to near $80 a barrel, this does not signify a bull market because global central banks’ dovish stance still represents a retreat of risk appetite,” said CMC Markets analyst Leon Li.
• With the Fed likely to raise interest rates for the last time in July, concerns about U.S. demand that will limit oil price gains are likely to remain.
• Economists are still concerned that U.S. inflation might not come down quickly enough even with rate hikes. A Reuters poll showed that core inflation, which strips out food and energy prices, will be only slightly lower or remain around the current level of just under 5% by the end of the year.
• However, on the positive front, China’s top economic planner pledged on Tuesday that it would roll out policies to “restore and expand” consumption in the world’s second-largest economy, which could boost oil demand, as consumers’ purchasing power remained weak.
• So far, as long as we assume the stimulus in China is going to be successful, oil balances will tighten significantly – even if Europe was to fall into a mild recession, said Rystad Energy’s North America research director Claudio Galimberti.

OFB’s Opinion

• It is anticipated that oil prices have the potential to exceed the upper limit of the range and reach $80 per barrel. This expectation is supported by recent data showing a decrease in crude oil inventories, gasoline, and distillate inventories.
• Factors such as U.S. demand, China’s commitment to economic growth, and constrained Russian supply are likely to exert upward pressure on prices. Therefore, the market anticipates a potential increase in oil prices.