IEA, OPEC Data Push Crude, Heating Oil to 7th Straight Week of Gains

After a brief selloff that looks like a round of profit-taking Thursday, the march higher has resumed this morning, setting the stage for a 7th consecutive week of gains for oil and diesel prices. Optimistic demand outlooks from OPEC and the IEA seem to be contributing to the strength in prices, while weaker equities are being shrugged off in the early going.

The recent run-up is great news for refiners (those that didn’t sell or convert their facilities in the past few years anyway) as crack spreads have surged to their highest levels of the year, and in some cases are approaching the $42/barrel (aka $1/gallon margin) mark which should make for a great Q3. While still a far cry from the record-setting levels we saw a year ago, those spreads are well above the $5-7/barrel break-even mark for most refineries and will encourage max output for those that are able.   

OPEC increased its outlook for economic growth for both 2023 and 2024 in its latest monthly oil market outlook, but held expectations for oil demand stead. The report also highlighted the recent strength in refinery margins, but also noted how tanker markets have been softening lately. The cartel’s oil output dropped by 836,000 barrels/day last month as Saudi Arabia made good on its pledge to voluntarily cut production by 1 million barrels/day, which offset increases from Iran, Iraq, Angola and Venezuela.

The IEA’s monthly oil market report highlighted global demand that it estimates is reaching all-time highs, despite so much concern about economic slowdown. The report also patted its authors on the back for the market finally rallying in July due to a tightening supply market which they’d be projecting for months. Perhaps the authors of this report are some of the same economists that will celebrate when the recession they’ve been predicting for the past 3 years finally happens as well.  

Just in case you thought Warren Buffet wasn’t still smarter than you: The White House announced $1.2 billion in grants to fund 2 “direct air capture” projects that will strip carbon dioxide out of the atmosphere. Occidental Petroleum owns one of those facilities, proving the Oracle of Omaha still has it with his big bets on Texas.

The tropics are still quiet for the time being with no active storms in the Atlantic expected over the next week, but NOAA forecasters increased their outlook for the season due to record-high water temperatures, which suggests the next few months are likely to get a little sporty for suppliers if those predictions come true.

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