Gradual Oil Price Rise Pauses - Rigzone News

Gradual Oil Price Rise Pauses | Rigzone

Gradual Oil Price Rise Pauses

The gradual rise in crude oil prices as inventory tightens has paused over the past week as traders’ focus has returned to the macro environment, analysts at Standard Chartered noted in a new report sent to Rigzone late Tuesday.

“We estimate the August global inventory draw at 2.8 million barrels per day, with a further 2.4 million barrel per day draw forecast next month,” the analysts said in the report.

“While we expect inventory tightening to be the dominant price driver in coming months, the market is still capable of slipping back into its Q2 macro-driven angst for periods,” they added.

In the report, the analysts highlighted that Brent crude for October delivery settled at $84.46 per barrel on August 21, which they pointed out was a week on week fall of $1.75 per barrel “after reaching an intra-day low of $83.05 per barrel on August 17”.

“The forward Brent curve has flattened week on week, with the prompt to second-month spread falling by $0.33 per barrel week on week to $0.37 per barrel. Further down the curve, Brent for delivery five years out rose by $0.51 per barrel week on week to $69.26 per barrel,” the analysts said in the report.

“While price action in the crude contracts may have been lackluster, strength in middle distillates continues to be driven by supply concerns due to unexpected refinery outages combined with low Atlantic basin inventories,” they added.

The front-month ICE gasoil Brent crack remained above $37 per barrel on August 18, the analysts outlined in the report, adding that this was the highest since the end of January and “significantly higher than May’s year to date low of around $13 per barrel”.

China Crude Oil Trade Data

The Standard Chartered analysts highlighted in the report that the third, “and most detailed”, release of July China crude oil trade data was published on August 20, adding that “the July data has been met with some disappointment in the market”.

“We note that the month on month falls are not unexpected given that June’s imports were the second highest on record, and the year on year and year to date increases remain very high,” the analysts stated in the report.

“The latest release confirms a sharp 2.412 million barrel per day month on month fall in crude imports to 10.429 million barrels per day, with a year on year increase of 1.519 million barrels per day and a year to date increase of 1.261 million barrels per day,” they added.

“Russia has retained its place as the top supplier, although volumes have decreased month on month by 665,000 barrels per day to 1.925 million barrels per day. The other large month on month changes are for imports from Saudi Arabia (-607,000 barrels per day to 1.348 million barrels per day) and the U.S. (-590,000 barrels per day to 163,000 barrels per day),” they continued.

EIA Weekly Data

In the report, the analysts said EIA weekly data was on the boundary between neutral and mildly bearish according to their U.S. oil data bull-bear index.

“It fell 4.4 week on week to -10.8, with the effect of bullish crude inventory data deflated by gasoline inventories and demand,” the analysts said in the report.

“Crude oil inventories fell 5.96 million barrels week on week to a seven-month low of 439.66 million barrels, just 0.05 million barrels above the year to date low,” they added.

“Implied gasoline demand fell 451,000 barrels per day week on week to 8.851 million barrels per day. The August to date year on year decrease is 129,000 barrels per day (1.4 percent) and the year to date increase is 107,000 barrels per day (1.2 percent),” they continued.

Oil Prices Appear to be Well Supported

In a separate report, which was sent to Rigzone on August 15, analysts at Standard Chartered said “oil prices appear to be well supported and the downside from negative China macroeconomic headlines has so far been relatively contained”.

“Front-month Brent reached a five-month high of $88.10 per barrel intra-day on August 10 and settled at $86.21 per barrel on August 14, a week on week gain of $0.87 per barrel,” the analysts said in that report.

“Volatility remains muted, with 30-day realized annualized Brent volatility at 21.9 percent as of August 14. It reached an 18-month low of 21.4 percent on August 9,” they added.

In this report, the Standard Chartered analysts noted that EIA weekly petroleum data was neutral for the third consecutive week, according to their oil data bull-bear index, which they revealed fell 13.7 week on week to -6.5.

Price Projection

Standard Chartered’s latest report reveals that the company expects the ICE Brent price to average $91 per barrel in 2023, $98 per barrel in 2024, and $109 per barrel in 2025.

The company anticipates that the commodity will average $88 per barrel in the third quarter, $93 per barrel in the fourth quarter, $92 per barrel in the first quarter of next year, $94 per barrel in the second quarter of 2024, $98 per barrel in the third quarter, and $106 per barrel in the fourth quarter.

Standard Chartered’s Brent price projections were identical in another report sent to Rigzone on July 18.

In its latest short term energy outlook (STEO), which was released in August, the U.S. Energy Information Administration (EIA) projected that the Brent spot price will average $82.62 per barrel this year and $86.48 per barrel next year.

The EIA’s latest STEO anticipates that the Brent spot price will average $83.77 per barrel in the third quarter, $87.65 per barrel in the fourth quarter, $88 per barrel in the first quarter of 2024, $87 per barrel in the second quarter of next year, $86 per barrel in the third quarter, and $85 per barrel in the fourth quarter.

The EIA’s previous STEO, which was released last month, saw the Brent spot price average coming in at $79.34 per barrel in 2023 and $83.51 per barrel in 2024.

Oil at $100?

Asked recently if the Brent crude oil price was on track to hit $100 per barrel this year, Emma Richards, an Associate Director of Oil & Gas at BMI, told Rigzone she thinks it’s unlikely that we’ll see Brent topping $100 per barrel this year and even less likely that it would be sustained at that level.

Responding to the same question, Al Salazar, Senior Vice President at Enverus Intelligence Research (EIR), told Rigzone that EIR continues to expect Brent prices to reach $100 per barrel before the end of the year, “subject to 1) consistent OECD crude and product stock draws, 2) OPEC adherence to production cuts, and 3) improving economic sentiment”.

To contact the author, email andreas.exarheas@rigzone.com

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Andreas ExarheasEditor | Rigzone

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