Brent nears $85/b, up 10% from early June lows

Quantum Commodity Intelligence – Crude oil futures edged higher on Tuesday as benchmarks extended a two-week rally to hold near June highs on renewed demand optimism.

First month August 24 ICE Brent futures were trading at $84.71/b (1645 GMT), compared with an intraday high of $85.25/b and Monday’s fix of $84.25/b, with prices up 10% from early June lows.

The forward spread also tightened, trading on 24 Aug/24 Sep near $0.80/b.

At the same time Jul24 NYMEX WTI trade at $80.89/b from Monday’s settlement of $80.33/b. The more liquid August 24 contract was trading $80.17/bfrom the previous settlement of $79.72/b.

Traders said sentiment remained upbeat, with oil markets set to remain in the deficit for the rest of the year after OPEC+ extended cuts until at least October, while the group is expected to tighten compliance.

“Investors shrugged off weaker-than-expected 5.6 percent growth in China’s industrial output, and oil refining fell to its slowest rate this year after more factories shut down for maintenance. we’re deep into the US driving season,” commented City Index analyst Fawad Razaqzada.

The latest data showed that China’s May crude output fell more than 2 percent from the same point last year and was the lowest since January 2023.

Physical

Meanwhile, physical North Sea prices continued to recover from recent lows, July barrels for the flagship forty-grade offer up to $1.30/b over Brent swaps with CIF Rotterdam data, which was close to dated parity on an FOB basis when adjusted for freight.

Crude oil markets were also boosted by improving distillate cracks in the past week, while European diesel markets returned to downgrades for the first time in two months, pointing to near-term support for the industrial road fuel as that oversupply concerns are fading.

Traders were monitoring two storms in the Gulf of Mexico and the Caribbean, and while neither weather system currently under watch is expected to pose a major threat to oil and gas infrastructure, it could be a precursor to what is expected to be a active storm in 2024. season.

Meanwhile, Federal Reserve Bank of New York President John Williams told Fox Business News on Tuesday that interest rates would only fall gradually, without saying when monetary easing would begin.

“I expect interest rates to gradually decline over the next two years, reflecting that inflation is returning to the 2% target and the economy is moving on a strong and sustainable trajectory,” Williams said.