ANZ summary of oil price influences, on both the demand and supply sides.
- Strong labour and inflation data last week stifled hopes that the Fed would pause its rate hike cycle
- Investor appetite subsequently waned as Treasury yields lifted higher and the USD strengthened
- Sentiment was further hit by weaker demand in Asia. Refiners in the region are considering cuts to output amid a dramatic drop in profit margins. Crack spreads for diesel and jet fuel have also plunged. The former is now trading near USD16/bbl, the lowest level since January 2022. Similar falls are being experienced in the US, with the profit gained from turning crude into diesel slumping to its lowest in more than a year.
- Nevertheless, the falls were limited as investors remain mindful of the supply side issues. OPEC’s decision to cut output by more than 1mb/d will not take effect until next month. We expect the cuts will increase the market deficit to 2mb/d in 2023.
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Meanwhile, via JP Morgan, forecasts Brent to $94 a barrel in Q4
- "The main takeaway for now: if the Fed pauses its rate-hiking campaign soon, the most likely scenario is that oil performs well
- if the US sees only a mild recession or lands softly, a new bull market may have already started forming"
JPMorgan expect recession at the end of 2023, or in 2024
