Crude Prices Fall Back on Chinese Demand Concerns

June WTI crude oil (CLM22) on Tuesday closed down -2.76 (-2.62%), and June RBOB gasoline (RBM22) closed down -0.89 (-0.25%).  

Crude oil and gasoline prices Tuesday posted moderate losses.  Crude prices were under pressure Tuesday from Chinese demand concerns after Fitch Ratings lowered its China 2022 GDP estimate.  Oil prices were also undercut as OPEC+ is expected to ratify its planned production increase for June at its regular meeting this Thursday.

Crude prices were weighed down Tuesday after Fitch Ratings cut its 2022 China GDP estimate to 4.3% from 4.8%, citing Covid lockdowns.

A surge in diesel prices is supportive of gasoline and other refined products.  The diesel crack spread Monday surged to a record high (data from 1986) on depleted global diesel supplies as countries worldwide shun Russian fuel supplies and scramble to obtain diesel supplies elsewhere.

Stronger-than-expected U.S. economic data on Tuesday showed strength in the economy that is bullish for energy demand and crude prices.  Mar factory orders rose +2.2% m/m, stronger than expectations of +1.2% m/m and the largest increase in 10 months.  Also, the Mar JOLTS job openings unexpectedly rose +205,000 to a record 11.549 million, showing a stronger labor market than expectations of a decline to 11.200 million.

Lower crude supplies from Libya are bullish for prices.  Libya Apr crude exports fell -16% m/m to 819.000 bpd, the smallest amount in 1-1/2 years, as damaged storage tanks from rebel attacks and political protests at key Libyan ports have curbed the country's crude exports.  

A surge in Covid infections in China has forced the government to impose pandemic restrictions and lockdowns that have curbed economic growth and energy demand.  A resurgence of Covid infections in China has prompted the government to put some 45 million people under pandemic lockdowns.  Citigroup analysts estimate that China's oil demand is down 1 million bpd on a year-to-date basis and that demand is not likely to come back anytime soon.

OPEC Crude production in April rose by +10,000 bpd to 28.700 million bpd, a 2-year high.  However, OPEC was expected to increase output by +274,000 bpd in April, but supply constraints in Libya and Nigeria prevented OPEC from reaching that level.  

Crude prices have support after Germany last Thursday dropped its opposition to a European Union ban on crude imports from Russia.  JPMorgan Chase last Tuesday warned that if the European Union acts too quickly to ban Russian crude oil, it will displace more than 4 million bpd of crude supplies that could send prices up to $185 a barrel.

Crude oil has support from ongoing concern that Russia may use energy as a weapon against countries that imposed sanctions for its attack on Ukraine.  Russia last Tuesday said it would halt natural gas shipments to Bulgaria and Poland for failing to pay for Russian gas supplies in rubles.  Russia is trying to force its European customers to pay rubles for its oil and gas exports.

The amount of crude held worldwide in floating storage on tankers has decreased and is bullish for prices.  Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week in the week ended April 29 fell by -4.5% w/w to 94.47 million bbl.