Oil futures: July Brent tops $117/b, front-month spread above $3/b
Quantum Commodity Intelligence - Crude oil futures Thursday raced higher with Europe seen moving closer to an outright ban on Russian oil as demand is projected to grow, while OPEC+ is set to stick with modest output hikes at its next meeting.
Front-month July ICE Brent futures were trading at $117.56/barrel (1735 GMT), compared to Wednesday's settle of $114.03/b, as the Jul22/Aug22 spread moved above $3/b.
At the same time, July NYMEX WTI was trading $114.30/b, versus Wednesday's settle of $110.33/b.
July Brent continues to lead the charge among key oil benchmarks, trading more than $3/b over the corresponding WTI contract and around $5.65/b against July cash Dubai.
The EU is set for showdown talks early next week to push through its latest sanctions package against Russia over the line, with Hungary seen as the main opponent to phasing out Russian oil by 2023.
"Regardless of whether the EU oil embargo goes ahead or not, there is in the sixth round of sanctions a shipping insurance ban that will still go ahead," Amrita Sen, Chief Oil Analyst at Energy Aspects, told the Gulf Intelligence Half-Time Talk webinar.
"It will get very, very difficult to move Russian oil," added Sen, noting the August implementation of tighter shipping procedures.
The European Commission this month proposed new sanctions against Russia, but the package called for the unanimous support of all 27 EU member states, which Hungary has so far blocked.
TotalEnergies has already reduced its use of Russian crude oil at its Leuna refinery in Germany, which relies on imports via the Druzhba pipeline, and has started work on an alternative supply chain via Gdansk in Poland.
Meanwhile, OPEC+ is set to stick to an oil production deal agreed last year at its meeting on June 2 and will likely raise July output targets by a modest 432,000 barrels per day, according to an informal Reuters poll of six OPEC+ delegates.
Crude prices initially retreated after EIA data revealed a much smaller draw in gasoline stocks than estimates from the API but recovered after markets refocused on the broader supply squeeze as the modest drop in gasoline stocks registered by the EIA came against a backdrop of maxed-out refining, while oil exports continued to surge.
"EIA reported a 1m bbl drop in crude oil stocks with exports reaching the third highest level on record at 4.3m bpd," commented Ole S Hansen, Head of Commodity Strategy at Saxo Group, noting that the Cushing storage hub dropped below 25 million barrels.
US refiners took in 16.27 million bpd of crude last week, its strongest run rate for this time of year since 2019 and some 2.1% above the five-year average and nearly 3% above the 10-year average.
Meanwhile, the likelihood of a lifting of sanctions on Iranian oil took a knock this week after the US State Department launched a clampdown on Iran's Revolutionary Guard, while US negotiator Robert Malley conceded that JCPOA talks were more likely to fail than succeed.
