Oil prices soared at the start of the week as OPEC+ shocked markets with a production cut announcement, but prices have since been capped by growing fears of demand destruction due to economic woes.
Friday, March 31st, 2023
Following the explosive rally in oil prices seen earlier this week, additional increases have been sluggish despite notable stock draws in both US crude and product inventories. With US demand coming back after a weak Q1 and OPEC+ getting really serious about curbing production, supply-side factors appear to indicate further upside. At the same time, macroeconomic woes might once again spoil the party, especially if weak US labor market data rekindle the fire of demand destruction.
Recession Fears Weigh on Diesel Prices. In contrast to rising oil prices, the premium of diesel against Brent or WTI has been shrinking for the past six months with its crack now at $130/mt as its cyclical sensitivity makes it vulnerable to declines in business activity and lower manufacturing orders.
Kurdish Crude Officially Back to Markets. The Iraqi federal government and Kurdistan’s regional authorities have signed a temporary deal to resume oil exports through Turkey and bring back some 450,000 b/d of Iraqi crude as the two-week standoff forced producers to halt production.
French Court Rules Against Requisitioning. A tribunal in the French city of Rouen ruled that a government order mandating that workers of TotalEnergies’ (NYSE:TTE) halted 240,000 b/d Gonfreville refinery return to work is illegal, indefinitely suspending the requisition order.
US Major Wraps Up Brazil Drilling Campaign. US oil major ExxonMobil (NYSE:XOM) will exit its self-operated license blocks in offshore Brazil after its exploration drilling program, comprising wells in the Campos, Santos, and Sergipe-Alagoas basins, failed to wield any commercial discovery.
Asian LNG Prices Bottom Out. Spot LNG prices in Asia are at the lowest level since July 2021, with cargoes for May delivery into northeast Asia changing hands around 12.50 per mmBtu, as weak Chinese buying and high stocks in OECD Asia keep any pricing upside firmly capped.
US to Tighten Power Plants Emissions Rules. The US Environmental Protection Agency is set to tighten emission standards for filterable particulate matter such as mercury and other toxic metals from coal plants, forcing the most polluting plants in North Dakota and Texas to cut emissions by 70%.