That is quite a recovery from what was a pretty dire situation for crude. Brent has now risen 6 weeks on the bounce, from a front month price close of around $19.15 on the 21st April to over $40 currently. If we don’t get a Friday sell off/profit taking, I’m sure that the powers that be in oil producing countries will be very happy indeed.
OPEC Meeting Saturday
The Organisation of the Petroleum Exporting Countries are having a cosy knees up this Saturday (June 6) joined by their quasi OPEC outsiders Russia and friends (or OPEC+) to discuss the deal on extending the oil output cuts. By discuss this actually translates into normal people speak as tell. It will be the larger producers of Russia, Saudi Arabia and friends telling everyone else what is going to happen and then strong-arming difficult countries to make the number fit. There had previously been disquiet on the level of compliance with the cuts previously achieved by some OPEC+ members, but after some political posturing it looks like the long-touted cut extension meeting is finally going to go ahead.
Rising Cracks
Don’t be childish, don’t laugh. But the cracks are rising. You can see this on HSFO and on Sing 10ppm gasoil. The Rott crack front month has moved from -9.70 at the start of last month to -5.80 this morning, this has happened despite rising Brent prices which would usually depress crack levels, as the raw material (crude) for refining becomes more expensive. There is a similar situation for Sing 10ppm gasoil, where cash premiums dropped to 19 cents a barrel to Singapore quotes yesterday, compared with 35 cents a day earlier. The drop in supplies has driven up prices as refiners now try to restart more operations. A symptom of the shortage of supply can be shown by the drop in Singapore onshore middle distillate stocks by 2% to a two-week low of 14.6 million barrels in the week ended June 3.
Rub Salt in the Wound
Diesel has become the poor man of the refining industry. European margins have hit an all-time low of $2.9/bbl, with the Asian grade averaging $4.26/bbl over Dubai crude. Apparently, a big European refiner has gone on the record and been quoted saying “The situation looks awful”, so you know that things are really not good for diesel people! The only way this can be solved is apparently to close refineries, with around 1 mil bpd or 1% of global capacity needs to be cut urgently.
FIS