Crude oil trading alert: Inventory decline may not offset Iranian oil's expected return to market, short-side forces strong, waiting for Iran nuclear deal to fall into place

By    18 Aug,2022

[Large gas importers commit to full supply of German liquefied natural gas (LNG) terminals]

Germany has secured commitments from several large gas importers to guarantee adequate supplies of two floating liquefied natural gas (LNG) terminals from this winter to reduce its dependence on Russian gas. German Economy Minister Habeck said this was part of an effort to make Germany less vulnerable to blackmail by Russian President Vladimir Putin and to allow Germany to build a strong and resilient energy infrastructure.

According to ship tracking data and trade sources, a second tanker carrying Mars crude produced from offshore fields in the US Gulf of Mexico has departed for Germany, and European refiners are now testing potential alternatives to Russian oil. Europe is aiming to cut Russian oil imports by 90 per cent by the end of the year. According to analysts, refiners are expected to seek alternative supplies from Norway, the Middle East, the US and West Africa.

[Barclays cuts Brent crude price forecast].

Barclays on Tuesday cut its Brent crude oil price forecast for 2022 and 2023 by $8 a barrel on expectations of a "robust" supply from Russia and a large surplus of crude oil in the near term. Barclays now sees Brent crude averaging $103 a barrel this year and next, and US crude averaging $99 a barrel.

Barclays said in its report that the recent price move lower was largely a timing issue, with strong Russian supply coinciding with rising doubts about an overall economic slowdown before the European Union launches sanctions later this year.

EU leaders agreed in late May to impose an embargo on Russian crude oil imports, which will come into full effect by the end of the year, with a ban on all Russian refined products two months later. Barclays expects Russian oil production to fall by 1.5 million bpd from pre-war levels once EU sanctions related to imports and insurance come into effect.

Barclays also noted that the actual downside risk to price forecasts could be limited as OPEC+ is expected to react to a possible slowdown in demand due to a mild recession next year, "We think the threshold for such intervention will be lower than in 2020 as Russia will be exempt from production cuts due to sanctions and US producers do not respond positively to price volatility. "

OPEC+, formed by the Organisation of Petroleum Exporting Countries (OPEC) and its allies led by Russia, will raise its production target by a paltry 100,000 bpd from September.

Positive factors affecting oil prices

[US crude oil inventories fell by 448,000 barrels last week].

US crude oil and fuel inventories fell last week, with stocks dropping by about 4.5 million barrels, while distillate stocks fell by about 759,000 barrels, according to data from the American Petroleum Institute (API). Analysts interviewed by Reuters predicted that US crude stocks fell by about 300,000 barrels last week, gasoline stocks fell by about 1.1 million barrels and distillate stocks rose by 400,000 barrels.

[Explosion at Russian base in Crimea].

Moscow condemned the destruction after an explosion at a Russian military base in Crimea. The base was a key supply line for Russia's invasion of Ukraine. According to Russian officials and news agencies, the explosion destroyed an ammunition depot at a military base in the northern Crimean peninsula, causing disruption to trains and forcing the evacuation of 2,000 people from nearby villages. Ukraine has not officially confirmed or denied responsibility for the explosion in Crimea, but its officials have publicly hailed the events in Crimea.

[S&P 500 closes higher helped by stronger-than-expected results from companies like Wal-Mart]