Oil futures: Crude nears 5-month highs amid Russian diesel squeeze
Quantum Commodity Intelligence – Crude oil futures Tuesday were nudging higher as benchmarks consolidated at close to five-month highs following a run of positive data and heightened geopolitical risks.
Front-month May24 ICE Brent futures were trading at $87.42/b (1935 GMT), compared to Monday's settle of $86.89/b and close to the day's high of $87.70/b.
At the same time May24 NYMEX WTI was trading at $82.80/b, versus Monday's settle of $82.16/b, while Apr24 was at $83.60/b heading into expiry.
Oil markets extended solid mid-month gains in the early part of the week as attacks continued on Russia's refining infrastructure, while positive macroeconomic data from China indicated improved industrial production and firmer oil demand.
"These factors combined to drive oil prices to their highest levels in four months, underscoring the intricate interplay between economic indicators and geopolitical events in shaping commodity markets," said Stephen Innes, managing partner SPI Asset Management.
Official data showed that Chinese industrial production was stronger than expected, rising 7% year on year in the first two months of the year and accelerating the demand for fuel.
Russia
Meanwhile, the repeated waves of attacks on Russia's refineries have underpinned refined product cracks, particularly diesel margins in Europe, although Moscow is expected to boost crude exports to make up for lost refined product sales.
"It is significant because obviously this is going to hit the distillate exports straight away… it's a distillate problem," said Torbjorn Tornqvist, speaking at the CERAWeek energy conference.
However, Iraq has pledged to trim crude exports to 3.3 million bpd, down from 3.43 million bpd last month, after missing OPEC+ quotas in the first two months of the year.
US government demand could increase this year after US Energy Secretary Jennifer Granholm said the Strategic Petroleum Reserve would be at or exceeding the level that would have existed before the 180 million barrel sale in 2022.
"By the end of this year we will essentially be back to where we would have been absent the sales," Granholm told the CERAWeek energy conference in Houston.
However, analysts have been skeptical on a quick refill of the SPR, noting buying has been running at a modest 3 million barrels per month, while current prices are also above price targets in the $70s/b for WTI.
Also speaking in Houston, Saudi Aramco CEO Amin Nasser said oil consumption would reach record levels this year, adding peak demand is some way off.
