Crude oil futures edged higher June 13 amid global supply concerns, but near-term demand concerns pushed refined products prices lower on the day.
NYMEX July WTI settled up 26 cents at $120.93/b and ICE August Brent climbed 26 cents to $122.27/b.
Crude futures, which had been trading sharply lower overnight, turned positive in midday New York trading following media reports about Libyan Oil Minister Mahamed Oun stating the county’s crude output was down 1.1 million b/d.
Escalating protests in Libya had seen the shut-in of more than half its crude output as of June 10, but Oun’s comments June 13 meant the country was pumping just 100,000 b/d of crude.
“The political crisis in Libya is roiling oil output, at a time when the world has little buffer to offset an additional disruption,” TD Securities analysts said in a note. “Persistent underproduction from OPEC+, related to a decade of underinvestment, along with stretched global spare capacity and critically low inventories all exacerbate the supply risk premia embedded in oil.”
Libya holds Africa’s largest proven reserves of oil and its main light-sweet Sharara and Es Sider export crudes yield a large amount of middle distillates and gasoline, making it popular with refineries in the Mediterranean region and Northwest Europe.
While global supply concerns buoyed crude prices, products futures came under pressure amid near-term demand risks highlighted by continued pandemic lockdown concerns in China and another day of steep declines in US equity markets.
NYMEX July RBOB settled 13.69 cents lower at $4.0353/gal and July ULSD fell 8.33 cents.
Selling pressure in US equity markets extended June 10 after indexes moved sharply lower the session prior following a higher-than-expected May inflation print. Persistent high inflation is likely to see the US Federal Reserve pursue an increasingly hawkish monetary policy that could see it accelerate planned interest rate hikes. The Federal Open Market Committee meets June 15 and is widely expected to announce a 50 basis point rate hike.
Higher interest rates, aimed at cooling an overheating economy, are likely to translate into weaker energy demand but they also typically result in a stronger dollar, which is also bearish for oil prices.
The ICE Dollar Index climbed above 105 in afternoon trading June 13 and was on pace to close at the highest since December 2002.
Meanwhile, COVID-19 worries in Beijing dampened the anticipated demand recovery in China and these concerns were further aggravated by Shanghai’s temporary lockdown measures on June 11 for coronavirus mass testing.
On June 12, Chinese authorities announced mass testing in Chaoyang, Beijing, until June 15, as the country doubles down on the zero COVID-19 policy.
“China remains the significant near-term downside risk, but most view the gradual normalization of Chinese demand as a powerful positive for oil despite the potential for lockdown noise in the coming weeks as current demand is far from reflecting normal conditions,” SPI Asset Management’s Managing Partner Stephen Innes said in a June 13 note.
Source: Spglobal.com
