OfBusiness Petroleum Dailies

8th May’23

Price

• Oil prices rose slightly in early Asian trade on Monday as fears of a recession in the U.S., which drove prices down for three straight weeks for the first time since November, began to recede.
• Brent crude futures were up 6 cents at $75.36 a barrel at 0022 GMT.
• U.S. West Texas Intermediate (WTI) crude futures were up 8 cents at $71.42. MCX Crude opened at 5847 with a rise of 2.78% to the previous close.

Demand and Supply

• Traders will get a brace of outlooks this week on how the second half of the year may shape up. The Organization of Petroleum Exporting Countries issues its monthly snapshot on Thursday and, ahead of that, the US Energy Information Administration delivers its short-term outlook on Tuesday. The world’s largest oil producer, Saudi Aramco, will also disclose earnings.
• Crude has dropped by about 11% this year as the Federal Reserve’s most aggressive tightening campaign in a generation spurred concerns of a US slowdown or recession, although most investors now expect that policymakers will pause rate increases. The drop has come despite a surprise production cut by OPEC and its allies including Russia. Still, there’s little evidence that Moscow has so far reduced its supply despite a vow to do so.
• The prompt spread for global benchmark Brent — the gap between its two nearest contracts — was last at 23 cents a barrel in backwardation. The figure has been fluctuating recently, swinging between 37 cents and 15 cents a barrel in backwardation over the previous week.

News

• “Oil’s rebound follows energy stocks’ comeback on Wall Street last Friday after the U.S. reported strong job data, which eased concerns about an imminent economic recession that led to the selloff early in the week.
• Fears that the U.S. banking crisis will slow the economy and sap fuel demand in the world’s biggest oil-consuming nation drove the Brent benchmark down 5.3% last week, while WTI plunged 7.1%.
• A healthy U.S. jobs report for April, a weaker dollar, and expectations of supply cuts at the next meeting of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, in June, helped the benchmarks rebound about 4% each on Friday.
• Crude prices are trying to stabilize as energy traders wait to see if OPEC+ might have to signal they are willing to reduce output even further.
• Goldman Sachs analysts said in a note on Saturday that concerns over near-term demand due to stress in the U.S. banking system and an industrial slowdown, and elevated global supply due to limited compliance with OPEC+ cuts were “overblown”.
• The United States is expected to report consumer price inflation figures for April on Wednesday, which could provide further clues on interest rate moves amid broad expectations that the U.S. Federal Reserve will pause rate hikes.

OFB’s Opinion

• It is anticipated that oil prices are likely to remain stable due to the fear of a recession in the U.S. However, there is concern about demand due to stress in the U.S. banking system and an elevated global supply caused by limited compliance with OPEC+ cuts.
• Crude prices are attempting to stabilize as energy traders wait to see if OPEC+ will signal that they are willing to reduce output even more.