Oil futures: Crude under pressure, Brent slides below $77.50/b
Quantum Commodity Intelligence – Crude oil futures came under further downwards pressure Tuesday after a choppy session that saw benchmarks unable to hold earlier gains.
Front-month Oct24 ICE Brent futures were trading at $77.22/b (2000 GMT), compared to the day's range of $76.55-$78.35/b and Monday's settle of $77.66/b.
At the same time Oct24 NYMEX WTI was trading at $73.21/b, versus Monday's settle of $73.66/b, while Sep24 last traded $73.82/b heading into the contract expiry.
Prices had already posted losses in four of the five previous sessions as concerns over demand growth took hold, while the geopolitical risk premium has slowly eroded as the month progressed.
"A softening demand outlook for crude oil, especially from refineries in China, and US recession concerns, have driven crude prices well below the levels desired by OPEC," said Ole S Hansen, Head of Commodity Strategy at Saxo Group, adding there is a growing likelihood the group will abandon plans to increase production from October.
"The slowdown in Chinese demand, particularly the drop in July oil refinery output to the lowest level since 2022, has increasingly made OPEC's forecast for a +2 million barrel a day increase in 2024 global demand growth look too optimistic, with the IEA's sub-1 million barrel a day increase appearing more plausible," commented Hansen.
Adding to broader woes, Asian gasoil cracks slumped to their lowest levels since April, falling below +$14/b versus Brent.
Support
This month's support had largely come from Middle East tensions after Iran threatened to attack Israel, while an escalation on the Russian-Ukraine border potentially threatens oil and gas supplies to Europe.
However, ceasefire talks brokered by the US continue between Israel and Hamas, but so far the two sides have not found common ground to push a deal through.
Latest reports indicated that Israel had accepted a 'bridging' deal, but Hamas negotiators have said the original terms have been altered.
Slightly better US inflation, retail sales and consumer confidence figures released last week also provided some support, prompting Goldman Sachs to lower the odds of the US falling into recession to 20%, down from 25%.
While futures have struggled over the past week, the North Sea physical market continues to find firm support, reported brokers, racing to 2024 highs on a differential basis.
Flagship Forties was bid in Monday's Platts MOC window at a premium of +$2.30/b versus the underlying Dated Brent swap on a FOB basis, the highest since last November, while WTI was bid at +$3.25/b on a CIF Rotterdam basis, also around +$2.30/b FOB equivalent.
