Oil futures: Crude retreats over 3.5% as demand concerns weigh
Quantum Commodity Intelligence – Crude oil futures Thursday were again in retreat as markets remained gripped by central-bank tightening policies, after crude benchmarks recorded a third month of declines in August.
Front-month November ICE Brent futures were trading at $91.95/barrel (2000 GMT), compared to Wednesday's settle of $95.64/b.
At the same time October NYMEX WTI was trading $86.28/b, versus Wednesday's close of $89.55/b.
Prices were already wavering since the start of the week, but China placing millions of its citizens under renewed lockdown after fresh outbreaks of Covid-19 further jolted markets.
Gasoline refining margins turned negative in Asia amid fears of a slowdown in demand, while China's official manufacturing PMI showed the second straight month of contraction in August, as the country struggled with a record heatwave and drought last month.
As a result the Brent/Dubai cash spread crunched to a two-year low on Thursday, assessed by Quantum at $0.22/b, versus $0.84/b for same spread in the previous session, although Brent/Dubai has been in decline since peaking at around $5/b in June.
On the supply side, OPEC's output hit 29.6 million bpd in August, according to a Reuters survey, while US output rose to 11.82 million bpd in June - both at their highest levels since April 2020.
The potential return of Iranian crude to markets also weighed on prices, as French President Emmanuel Macron said Thursday he hoped that a deal to restore nuclear limits on Iran would be agreed on in the coming days.
OPEC+
The OPEC+ Joint Technical Committee initially said Wednesday it sees global oil supply exceeding demand by 900,000 bpd this year, but subsequently revised down the figure to 400,000 bpd.
Forecasts are based on members pumping at quota but given the group is collectively missing targets by around 2.9 million bpd, analysts say that either figure is largely nominal.
Natural gas markets continued the week's sharp reversal on Wednesday and Thursday despite Gazprom starting a three-day maintenance shutdown of the Nord Stream pipeline, with both Asia and Europe dropping by 25-30% since last week's record highs.
Markets remain prone to sharp swings, with or without a news driver, leaving hedge-fund manager Pierre Andurand to describe oil futures markets as "completely broken" in a comment aimed at the extreme volatility.
Meanwhile, underlying volumes in the North Sea Dated Brent benchmark are set to rebound in October, as extended North Sea maintenance and upgrading work is completed for the 2022 summer season.
Supply from the five grades that underpin Dated Brent – Brent/Ninian, Oseberg, Forties, Ekofisk, and Troll – will average around 775,000 bpd in October, up 115,000 bpd versus the revised program of around 660,000 bpd in September.
