Oil futures: Crude surge continues, weekly gains of over 15% on OPEC+ move

7 Oct 2022

Quantum Commodity Intelligence - Crude oil futures Friday were again racing higher as benchmarks saw another surge heading into the weekend, with prices set for gains of over 15% since last Friday as the OPEC+ cuts dominated the news cycle.

Front-month December ICE Brent futures were trading at $97.97/b (1915 GMT), compared to Thursday's settle of $94.42/b and last Friday's close of $85.14/b for the Dec22 contract. 

At the same time, Nov22 NYMEX WTI was trading $92.70/b versus Thursday's settle of $88.45/b and last Friday's close of $79.49/b.

Although actual reductions will be substantially below the headline OPEC+ 2 million bpd announcement, the November cuts come at a time when Russian barrels are set to tighten due to EU sanctions and the US-proposed price cap, while the US SPR sales program is winding down.

"Estimates of the true cut range between 800,000-1.2 million bpd. So, using a midpoint of 1 million bpd could be sufficient not only to set a price demarcation line at Brent $85 p/b, but it is conceivable that the international benchmark could push back above the psychological $100 mark," said Stephen Innes, managing partner SPI Asset Management.

Following the OPEC+ cut, Goldman Sachs hiked its Brent price forecast for this year and next, as the investment bank expects OPEC+'s output cut to be "very bullish" for prices going forward.

The US bank raised its 2022 forecast to $104/b from $99/b and the 2023 forecast to $110/b from $108/b.

Crude markets have also found support from the firm recovery in key refined products this week after struggling since the summer peaks.  

In northwest Europe, gasoline cracks are at their widest since mid-August as excess supply winds down on firm exports and low regional runs.

Eurobob oxy E5 cracks are above $17/b to ICE Brent this week for the first time since the middle of August, up around $5/b from the end of September and low single digits a month ago, according to quantum data.  

Meanwhile, the price of diesel loading out of Singapore surged to a one-month high Thursday on rising demand to ship cargoes to Europe and firmer crude oil.

Quantum assessed 10ppm cargoes at $141.31/b at 1630 Singapore time, up more than $8.50/b on the day, lifting the refining margin for diesel over Brent futures to the highest level in four weeks at $48/b – up almost $7/b on the day.

In contrast to oil, European benchmark TTF prices continued to tumble as the Nov22 contract slumped a further 11% Friday to close at a 2.5-month low of €156.207/MWh, amid mild weather and replenished storage tanks.