Oil futures: Brent higher as IEA’s Birol flags China demand, Ceyhan disruption
Quantum Commodity Intelligence - Crude oil futures Monday were slightly higher, rebounding from the previous-week’s heavy losses of over 7%, including a sharp selloff on Friday, although markets remained choppy amid conflicting price signals.
April ICE Brent futures were trading at $80.77/b (1750 GMT), compared to the day’s range of $79.10-$81.25/b and to Friday's settle of $79.94/b.
At the same time, Mar23 NYMEX WTI was trading $73.94/b versus Friday's settle of $73.39/b.
Prices climbed higher after International Energy Agency's (IEA) Executive Director Fatih Birol reiterated recent comments that oil producers might have to reconsider output policies following a demand recovery in China.
"This may be even stronger if the Chinese economy advances stronger than we assume," Birol told Bloomberg TV ahead of the India Energy Week forum opening Monday. "Global oil and LNG demand will go upwards."
Jet fuel consumption in China is already "very, very strong," and that's likely to increase overall oil demand if it continues to grow at the same pace, Birol added.
Crude values also moved higher Monday on reports that operations had been suspended at the Ceyhan export terminal on the Mediterranean, potentially impacting crude flows via the BTC and Kirkuk-Ceyhan pipelines.
However, officials said only flows on the smaller-capacity Kirkuk-Ceyhan pipeline have been stopped following the severe earthquake in Turkey.
Prices at one point eased back as the Dollar Index rebounded to around 103.70 points, making dollar-denominated oil imports more expensive.
This came after US nonfarm payrolls increased by 517,000 for January, significantly above the Dow Jones estimate of 187,000 and December’s gain of 260,000, which in broader terms was a positive for oil.
Ole S Hansen, Head of Commodity Strategy at Saxo Group, said in a client note the market remains troubled by long liquidation from hedge funds forced to reduce recently established long positions but added the market is close to finding a floor.
"We believe that Chinese demand and additional sanctions against Russian fuel exports starting on February 5, together with OPEC+ price support through its actively managed production have created a soft floor under the market," said Hansen, commenting on last week's price falls.
Refined product cracks in Europe retreated ahead of the price ceiling on Russian products that came into effect Sunday, capping high-value exports such as distillates and gasoline at $100/b, while lower-value products such as fuel oil will be capped at $45/b.
Diesel stockpiling in Europe ahead of the Russian cut-off alleviated immediate supply worries and pressured margins, while a tight jet market in Asia saw the Singapore regrade flip to positive for the first time since the pandemic.
Cracks for diesel barges traded in the ARA hub tumbled $11/b on the week to $27.93/b amid stockpiling in Europe ahead of the Russian cut-off.
Gasoline cracks also retreated amid rising supplies, as Eurobob oxy gasoline's refining margin to ICE Brent closed Friday at a two-week low of $12.90/b.
Meanwhile. gasoil cracks slumped to 11-month lows in Asia at the start of the week after the EU agreed to the price cap on Russian diesel, a move that will likely see Moscow look to send more of its output east as it struggles to place barrels in traditional European markets.