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Global physical crude oil markets are weakening because of soft refinery demand and ample supply, traders and analysts told Reuters, in a move that could spell further weakness for benchmark crude futures.
The weakness indicates high interest rates and inflation are depressing consumer and industrial demand, in Nigeria, Africa and especially in Europe, at a time when supply is rising from non-OPEC producers such as the United States. This could bolster arguments for OPEC+ to maintain production curbs at a June 1 meeting. “Rising refinery capacity has not been met by an expected rise in demand,” Saxo Bank analyst Ole Hansen said.
The weakness is exhibited particularly clearly in the North Sea, which produces crude grades that alongside U.S. WTI Midland crude underpin the Brent futures benchmark and help price two thirds of global oil.
In the United States, physical markets have also softened as U.S. refinery processing rates have stayed below regular seasonal levels despite the end of a maintenance season.
Refinery profit margins around the world have weakened partly because of a global slump in diesel values, a key refined product for the industrial and transport sectors alike.
Nigeria’s crude oil grade prices in the international market surge.
According to market data, Brass River and Qua Iboe futures of Nigeria’s oil recorded gains on Monday.
Brass River, a sweet medium light crude, gained 0.70 per cent to trade at $86.60 per barrel, while the Qua Iboe, a light sweet crude grade, also gained 0.70 per cent to trade at $86.60 per barrel.
Meanwhile, US WTI and Brent crude stood at $79.96 and $83.81 as of the report’s filing time, respectively.
Earlier, JPMorgan analysts said on Sunday that Raisi’s death could result in volatility in the oil markets.
“From here, we expect overall market fundamentals to improve and see similar inventory draws and price action as observed last summer, with Brent oil moving $10 higher from current levels by September,” JPMorgan analysts said.