Oil markets are more and more gazing in the direction of the OPEC+ assembly in June when the group will determine what to do with manufacturing in Q3-24.
That’s what Bjarne Schieldrop, the Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), stated in a report despatched to Rigzone on Monday.
“Our view is that the group will regulate manufacturing as wanted to achieve the oil worth it needs, which generally is $85 per barrel or larger,” Schieldrop acknowledged within the report, including that, “that is most likely additionally the final view available in the market”.
- Advertisement -
In accordance with OPEC’s web site, the following OPEC and non-OPEC ministerial assembly can be held on June 1 in Vienna. The following assembly of the joint ministerial monitoring committee is scheduled to happen on the identical day, the positioning reveals.
Within the SEB report, Schieldrop highlighted that Brent rose 2.5 % final week.
“The bullish drivers have been, one, business crude and product shares declined 3.8 million barrels versus a standard seasonal rise of 4.4 million barrels; two, strong positive aspects in front-end Brent crude time-spreads indicating a good crude market; and three, a optimistic backdrop of a 2.7 % acquire in U.S. S&P 500 index,” he famous within the report.
Schieldrop identified within the report that Brent was falling nearly one % “on diesel considerations” yesterday morning.
“This morning Brent crude is pulling again 0.9 % to $88.7 per barrel counter to the truth that the final backdrop is optimistic with a weaker USD, fairness positive aspects each in Asia and in European and U.S. futures, and, not the least, additionally optimistic positive aspects in industrial metals with copper buying and selling up 0.4 % at $10,009/ton,” he stated.
The SEB analyst highlighted that the “bearish angle on oil” on Monday morning was “weak diesel demand with diesel ahead curves in front-end contango and predictions for decrease refinery runs in response [to] this down the highway”.
“I.e. that the present front-end power in crude curves (elevated backwardation) reflecting a present tight crude market will dissipate in not too lengthy on account of doubtless decrease refinery runs,” he stated.
“Numerous deal with weak spot in diesel demand and cracks. However we have to keep in mind that we noticed the identical weak spot final spring in April and Might earlier than the diesel cracks rallied into the remainder of the 12 months,” he added.
“Diesel cracks are additionally very seasonal with pure winter-strength and likewise pure summer season weak spot. What issues for refineries is after all the general refining margin reflecting demand for all merchandise. Gasoline cracks have rallied to shut to $24 per barrel in ARA for the front-month contract,” he continued.
“If we compute a proxy ARA refining margin consisting of 40 % diesel, 40 % gasoline and 20 % bunkeroil we get a refining margin of $14 per barrel which is manner above the 2015-19 common of solely $6.5 per barrel,” he went on to state.
Schieldrop famous within the report that this doesn’t consider “the now a lot larger prices to EU refineries of carbon costs and nat gasoline costs”.
“So, the image is rather less rosy than what the $14 per barrel could appear like,” he warned.
Shieldrop additionally outlined within the report that the “oil product shock from the Russian struggle on Ukraine has dissipated considerably” however added that “it’s nonetheless clearly there”.
In a analysis notice despatched to Rigzone final Thursday, analysts at J.P. Morgan revealed that their base case “stays an unchanged $90 Brent by way of Might and $85 in 2H24”.
“The danger bias across the name, nonetheless, modified in early March from impartial to bullish, with about 25 % likelihood of a $100 spike by September,” the analysts added.
In a separate analysis notice despatched to Rigzone final Friday, J.P. Morgan projected that the Brent crude worth will common $85 per barrel general in 2024 and $75 per barrel general in 2025.
To contact the creator, e-mail andreas.exarheas@rigzone.com
