Oil futures: Brent up 2% as looming sanctions offset China slowdown
Quantum Commodity Intelligence - Crude oil futures Tuesday were higher with markets again torn between concerns over supplies ahead of further EU sanctions on Russia and a likely Covid-led demand slowdown in China.
Front-month January ICE Brent futures were trading at $94.86/b (1900 GMT), compared to the day's high of $95.55/b and Monday's settle of $92.81/b.
At the same time, Dec22 NYMEX WTI was trading at $88.57/b versus Monday's settle of $86.53/b.
"The further we move into November, the closer we get to the EU-Russian oil embargo taking effect, which will have a material impact on Russia's supply and by extension global supply," said Stephen Innes, managing partner SPI Asset Management.
A potential winter supply crunch has been most keenly felt in the diesel sector, where cracks rallied sharply in October, although have eased back so far this month.
While the Dubai crude benchmark was almost flat on the month, FOB Singapore 10ppm gasoil was up nearly $10/b in October to average $137.48/b, versus September's average of $128.88/b.
In Europe, ULSD FOB Barge ARA averaged $1,198.55/mt versus a September average of $1,031.71/mt, according to Quantum data.
But the voluntary boycott of Russian barrels by western firms has had little impact so far, with Asian buyers picking up the slack.
Russian output and exports were down just 0.2% in October, with daily crude output for the month averaging 10.78 million bpd versus September's output of 10.8 million bpd. Output was 11.3 million bpd in January before it invaded Ukraine.
Meanwhile, the strike at TotalEnergies' Gonfreville refinery and Feyzin depot will continue until at least 2 November as the CGT union appealed for support from other workers in a new France-wide demonstration next month.
Prices were also boosted Tuesday after Amos Hochstein, special presidential coordinator for President Joe Biden, noted that the administration will need to replenish the SPR to the tune of 200 million barrels, albeit over several years.
The US official also said a buy-back price of "$70/b or so" had given producers "certainty of price to some degree".
The Dollar Index dipped back below 111 points Tuesday, over 0.5% lower on the day, making dollar-denominated oil imports less expensive.
China
Millions of people have been impacted by up to 200 various forms of lockdown in China, as the country of 1.45 billion consistently records more than 1,000 new Covid cases a day.
Earlier this month, Chinese President Xi Jinping indicated there would be no easing of the zero-Covid policy - which aims to wipe out all outbreaks - calling it a "people's war to stop the spread of the virus".
China's lacklustre factory and service activity data released Monday suggests the economy continues to struggle with the October purchasing managers' indexes below 50 for both the manufacturing and non-manufacturing sectors, indicating contractions from the previous month.
Ting Lu, chief China economist at Nomura, expects the zero-Covid policy to last at least until March. He sees real GDP growth potentially turning negative this quarter amid a slowdown in exports and negativity in the housing market.
