Analys
SEB – Råvarukommentarer vecka 18 2012
Sammanfattning: Föregående vecka
Brett råvaruindex: +1,62 %
UBS Bloomberg CMCI TR Index- Energi: +1,42 %
UBS Bloomberg CMCI Energy TR Index - Ädelmetaller: +2,12 %
UBS Bloomberg CMCI Precious Metals TR Index - Industrimetaller: +3,47 %
UBS Bloomberg CMCI Industrial Metals TR Index - Jordbruk: +0,59 %
UBS Bloomberg CMCI Agriculture TR Index
Kortsiktig marknadsvy:
- Guld: Neutral/köp
- Olja: Sälj
- Koppar: Sälj
- Majs: Sälj
- Vete: Neutral/sälj
Guld
- Guldet steg 1,97 procent förra veckan och har för tillfället svårt att bryta ut på uppsidan. Flera länder går till val i Europa vilket försvårar för gemensamma förhandlingar. Tidigare överenskommelser såsom den förhandlade budgetpakten, som drivits fram av Tyskland, kan komma att rivas upp eller omförhandlas vilket försvagar euron och ger styrka till dollarn vilket i sin tur dämpar guldpriset.
- I USA redovisade U.S Mint guldmyntförsäljningen för april vilken var den lägsta på fem år. Endast 17 000 troy ounce (ett troy ounce är ca 31 gram) har sålts i april jämfört med 70 000 ton under årets tre första månader. Spekulativa positioner på Comex har också minskat.
- Fed lämnade räntan oförändrad vilket ger stöd åt guldpriset samtidigt som avsaknaden av ytterligare stimulanser verkade dämpande. Guldpriset var oför-ändrat på Feds räntebesked.
- Centralbanker är fortfarande nettoköpare av guld och den ryska centralbanken ökade sin reserv med 15,5 ton. Guldet kommer troligen från inhemsk produktion. Börsen i Shanghai kommer att införa högre marginalkrav för några råvaror, däribland guld. Höjningen träder i kraft den 27:e april. Detta kan tillfälligt förhindra prisökningar.
- Teknisk Analys: Dubbelbotten? Bara marginella rörelser noterade sedan förra fredagen. Dock har vi fått ett par spikar på nedsidan vilket visar att köparna har visat intresse under 1640 området något som vi tolkar lätt positivt. Som tidigare krävs dock åtminstone en uppgång över 1680 för att öka på sannolikheten för att en botten äntligen är på plats.
Olja
- Europa fortsätter att oroa marknaden och statistik från det viktiga dragloket Tyskland har varit sämre än förväntat. Preliminära inköpschefsindexet för den tyska industrin sjönk till 46,3 i april jämfört med 48,4 i mars. Det är den lägsta siffran på 33 månader. Att S & P:s beslutade att sänka Spaniens kreditbetyg två steg med fortsatt negativa utsikter spär på oro och ovisshet.
- Fed lämnade räntan oförändrad på onsdagen med en förväntad låg ränta t.o.m. slutet av 2014 eftersom de ekonomiska förhållandena enligt Fed kräver en extrem lågräntepolitik. Vad gäller kvantitativa lättnader så är Fed redo att göra mer om förhållanden i marknaden skulle kräva det. Oljepriset steg på beskedet att Fed trots allt reviderade upp sin prognos för amerikansk tillväxt i 2012.
- Förra veckan gjorde Iran ett utspel där landet meddelade att man kommer att överväga Rysslands förslag om att inte vidareutveckla landets kärnvapenprogram och att tillåta ytterligare inspektioner. Utspelet kan mycket väl vara ett sätt för landet att vinna tid. Oljan sjönk en procent efter uttalandet. Nytt atommöte med Iran kommer att hållas i Bagdad den 23:e maj.
- Veckostatistik från American Petroleum Institute (API) visade att råoljelager föll med en miljon fat medan onsdagens DOE siffra visade att råoljelager steg med fyra miljoner fat mot förväntade tre miljoner.
- Teknisk Analys: Återtest av bandet & sedan ned. Vi bör nu vara i slutfasen av återtestet av 55 dagars bandet (vi flaggade för förra veckan). Återtestet har gått långsammare än förväntat vilket å andra sidan visar på lågt deltagande av köpare, något som passar bra in i vår nu något mer negativ vy.
Koppar
- S & P:s beslutade i torsdags att sänka Spaniens kreditbetyg två steg med fort-satt negativa utsikter. Motiveringen är en ökad risk att spanska staten behöver mer kapital för att kunna bistå bankerna samt risk för två år med recession. Hela Eurozonen fick en känga av S & P: ”strategin att hantera Europas stats-skuldkris fortsätter att sakna effektivitet.” Euroländerna måste besluta om man ska hjälpa Spanien.
- Dollarn stärktes på S & Ps besked och kopparpriset steg t.o.m något trots dollarns förstärkning.
- Enligt kinesiska myndigheter importerade Kina 345,7 ton koppar i mars vilket är en minskning med 8 procent från februari. Flera rapporter bekräftar att koppar-lagren i Kina är välfyllda till bredden. Inkluderat 600 000 ton i frihamnslager uppges lagren uppgå till 1 miljon ton. Enligt estimat finns ¾ av globala lager i Kina nu. Marknaden i Kina är stängd idag.
- Terminskurvan i koppar är i backwardation dvs. framtida förväntade priser är billigare än aktuellt pris och denna skillnad blir allt större vilket vi tolkar som att tillgången på koppar utanför Kina är begränsad USA:s BNP ökade med 2,2 procent på årlig basis under det första kvartalet vilket var lägre än vad analytiker hade räknat med enligt Bloomberg. Siffran kan tolkas på så sätt att sannolikheten för kvantitativa lättnader ökar.
- Teknisk Analys: Färdig korrektion. Studsen upp från trend linjen blev lite starkare än vad vi initialt räknade med (8218) vilket i och för sig inte ändrar nå-got av den större vyn. Vi ser fortfarande marknaden som negativ och kommer att fortsätta göra så länge vi inte återetablerar oss över medelvärdesbanden.
Majs
- Majspriset steg ca en halv procent förra veckan. Vi kan se en fortsatt hög volatilitet i majsmarknaden, där majkontraktet i Chicago handlades upp och ned med några procent varje dag, men utan tydlig riktning.
- En faktor som hjälpt till att trycka upp priset är den kinesiska efterfrågan, där USDA i början av veckan kom ut med statistik som påvisade en god export av amerikansk majs till okända destinationer. Det kunde senare under veckan bekräftas att en stor del av denna majs gått till Kina.
- Samtidigt har det spekulerats en hel del kring huruvida den goda starten på den amerikanska majsplanteringen ska kunna fortsätta på samma sätt framöver, där det funnits en viss oro för att det kalla väder som råder norr om flera viktiga majsstater ska leta sig söderut. Då en mängd prognoser visat på att så inte är fallet har oron minskat och med dessa även efterfrågan på majs.
- Vi anser inte att förra veckans uppgång kan motiveras av stark efterfrågan från Kina och tror med detta att majspriset under den kommande veckan kommer att kunna falla tillbaka något.
- Teknisk Analys: Lite förvirrat. Efter det falska brottet under botten linjen samt efterföljande test och studs av densamma ser det ut som om marknaden skulle kunna vara på väg att söka sig norrut. Å andra sidan har vi än så länge inte lyckats hålla oss kvar över mitten punkten, 624, av den kraftigt stigande ”candlen” per 30:e mars. För att minska förvirringen måste vi bryta antingen 632 eller 609 ½.
Vete
- Vetet i Paris föll nära två procent veckan som gick. För närvarande är korrelationen mellan det amerikanska och det europeiska vetet mycket låg.
- I Europa är det en blandad utveckling med förhållandevis goda prognoser avseende veteskörden i Tyskland, Storbritannien och Frankrike. Samtidigt är förutsättningarna bedrövliga i Spanien, där man gång på gång tvingas justera ned sina produktionsestimat.
- I början av veckan kom International Grains Councils senaste spannmålsrapport, i vilken organisationen justerar ned sin prognos för den globala veteskörden. Denna nedrevidering av tidigare estimat är i princip uteslutande baserad på de europeiska köldproblemen från första kvartalet.
- Vi förhåller oss neutrala till svagt negativa till vetet i Paris denna vecka, där vi dock är beredda att snabbt positionera oss mot en nedgång om planteringssiffrorna fortsätter att överraska oss positivt i USA och Europa.
- Teknisk Analys: Tunga motstånd bromsar. Efter att i princip ha tangerat årshögsta faller vi tillbaka något i vad som får anses vara en mindre vinsthemtagning. Vidare behöver nog marknaden samla lite styrka för att kunna ta sig an ett så pass tungt motstånd som 219-området. Det mest troliga utfallet ser ut att bli intervall handel mellan medelvärdesbandet och topp området.
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Disclaimer
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Opinions contained in this report represent the bank’s present opinion only and are subject to change without notice. All information contained in this report has been compiled in good faith from sources believed to be reliable. However, no representation or warranty, expressed or implied, is made with respect to the completeness or accuracy of its contents and the information is not to be relied upon as authoritative. Anyone considering taking actions based upon the content of this document is urged to base his or her investment decisions upon such investigations as he or she deems necessary. This document is being provided as information only, and no specific actions are being solicited as a result of it; to the extent permitted by law, no liability whatsoever is accepted for any direct or consequential loss arising from use of this document or its contents.
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Analys
Not below USD 70/b and aiming for USD 80/b

Saudi Arabia again reminded the global oil market who is king. Oil price is ticking carefully upwards today as investors are cautious after having burned their fingers in the production cut induced rally to (almost) USD 90/b which later faltered. We expect more upside price action later today in the US session. The 1 m b/d Saudi cut in July is a good tactic for the OPEC+ meeting on 4-6 July. Unwind if not needed or force all of OPEC+ to formal cut or else….Saudi could unwind in August. The cut will unite Saudi/Russia and open for joint cuts if needed. I.e. it could move Russia from involuntary reductions to deliberate reductions

Adjusting base-lines and formalizing and extending May cuts to end of 2024. OPEC+ this weekend decided to extend and formalize the voluntary agreement of cuts in May. These cuts will now be and overall obligation for the group to produce 40.5 m b/d on average in 2024 (not including natural gas liquids). There were some adjustments to reference production levels where African members got lower references as they have been unable to fill their quotas. UAE on the other hand got a 200 k b/d increase in its reference production level to match actual capacity increases. It was also a discussion of whether to change the baseline for Russia’s production. But these changes in baselines won’t make any immediate changes to production.
Unilateral cut of 1 m b/d by Saudi in July. The big surprise to the market was the unilateral 1 m b/d cut of Saudi Arabia for July. To start with it is for July only though it could be extended. The additional cut will
1) Make sure the oil price won’t fall below 70
2) Prevent inventories from rising
3) Help prevent capex spending in upstream oil and gas globally is not getting yet another trough
4) Make for a great tactical negotiation setup for next OPEC+ meeting on 4-6 July
a) If the 1 m b/d July cut is unnecessary, then it will be un-winded for August
b) If it indeed was needed then Saudi can strong-arm rest of OPEC+ to make a combined cut from August. Else Saudi could revive production by 1 m b/d from August and price will fall.
5) It is roughly aligning actual production by Russia and Saudi Arabia. Actually it is placing Saudi production below Russian production. But basically it is again placing the two core OPEC+ members on equal footing. Thus opening the door for combined Saudi/Russia cuts going forward if needed.
Saudi produced / will produce /Normal production:
April: 10.5
May: 10.0
June: 10.0
July: 9.0
Normal prod: 10.1
Oil price to strengthen further. Especially into the US session today. We expect crude oil prices to strengthen further and especially into the US session today. Price action has been quite careful in response to the surprise 1 m b/d cut by Saudi Arabia so far today. Maybe it is because it is only for one month. But mostly it is probably because the market in recent memory experienced that the surprise cut for May sent the Dated Brent oil price to USD 88.6/b in mid-April before it again trailed down to almost USD 70/b. So those who joined the rally last time got burned. They are much more careful this time around.
USD 80/b is the new USD 60/b and that is probably what Saudi Arabia is aiming for. Not just because that is what Saudi Arabia needs but also because that is what the market needs. We have seen a sharp decline in US oil rig count since early December last year and that has taken place at an average WTI price of USD 76/b and Brent average of USD 81/b. Previously the US oil rig count used to expand strongly with oil prices north of USD 45/b. Now instead it is declining at prices of USD 75-80/b. Big difference. Another aspect is of course inflation. US M2 has expanded by 35% since Dec 2019 and so far US CPI has increased by 17% since Dec 2019. Assume that it will rise altogether by 30% before all the stimulus money has been digested. If the old oil price normal was USD 60/b then the new should be closer to USD 80/b if adjusting for a cumulative inflation increase of 30%. But even if we just look at nominal average prices we still have USD 80/b as a nominal average from 2007-2019. But that is of course partially playing with numbers.
Still lots of concerns for a global recession, weakening oil demand and lower oil prices due to the extremely large and sharp rate hikes over the past year. That is the reason for bearish speculators. But OPEC+ has the upper hand. This is what we wrote recently on that note: ”A recession is no match for OPEC+”
Aligning Saudi production with Russia. Russian production has suffered due to sanctions. With a 1 m b/d cut in July Saudi will be below Russia for the first time since late 2021. Russia and Saudi will again be equal partners. This opens up for common agreements of cuts. Reduced production by Russia since the invasion has been involuntary. Going forward Russia could make deliberate cuts together with Saudi.

Short specs in Brent and WTI at 205 m barrels as of Tuesday last week. They will likely exit shorts and force the oil price higher.

Long vs. Short specs in Brent and WTI at very low level as of Tuesday last week. Will probably bounce back up.

US oil rig count has declined significantly since early Dec-2022 at WTI prices of USD 76/b and Brent of USD 81/b (average since Dec-2022).

Historical oil prices in nominal and CPI adjusted terms. Recent market memory is USD 57.5/b average from 2015-2019. But that was an extremely bearish period with booming US shale oil production.

Analys
A recession is no match for OPEC+

History shows that OPEC cuts work wonderfully. When OPEC acts it changes the market no matter how deep the crisis. Massive 9.7 m b/d in May 2020. Large cuts in Dec 2008. And opposite: No-cuts in 2014 crashed the price. OPEC used to be slow and re-active. Now they are fast and re-active. Latest cut indicates a ”reaction-function” with a floor price of USD 70/b. Price could move lower than that in May, but JMMC meeting on 4 June and full OPEC+ meeting on 5-6 July would then change the course. Fresh cuts now in May will likely drive market into deficit, inventory draws, stronger prices. Sell-offs in May should be a good buying opportunities

Production cuts by OPEC+ do work. They work wonderfully. Deep cuts announced by OPEC in December 2008 made the oil price bottom at USD 33.8/b on Christmas Eve. That is USD 48.3/b adj. for CPI. The oil price then collapsed in 2014 when it became increasingly clear during the autumn that OPEC would NOT defend the oil price with confirmation of no-cuts in December that year. The creation of OPEC+ in the autumn of 2016 then managed to drive the oil price higher despite booming US shale oil production. A massive 9.7 m b/d cut in production in May 2020 onward made the oil price shoot higher after the trough in April 2020.
Historical sequence pattern is first a price-trough, then cuts, then rebound. This history however points to a typical sequence of events. First we have a trough in prices. Then we get cuts by OPEC(+) and then the oil price shoots back up. This probably creates an anticipation by the market of a likewise sequence this time. I.e. that the oil price first is going to head to USD 40/b, then deep cuts by OPEC+ and then the rebound. If we get an ugly recession.
But OPEC+ is faster and much more vigilant today. Historically OPEC met every half year. Assessed the situation and made cuts or no cuts in a very reactive fashion. That always gave the market a long lead-time both in terms of a financial sell-off and a potential physical deterioration before OPEC would react.
But markets are faster today as well with new information spreading to the world almost immediately. Impact of that is both financial and physical. The financial sell-off part is easy to understand. The physical part can be a bit more intricate. Fear itself of a recession can lead to a de-stocking of the oil supply chain where everyone suddenly starts to draw down their local inventories of crude and products with no wish to buy new supplies as demand and prices may be lower down the road. This can then lead to a rapid build-up of crude stocks in the hubs and create a sense of very weak physical demand for oil even if it is still steady.
Deep trough in prices is possible but would not last long. Faster markets and faster OPEC+ action means we could still have a deep trough in prices but they would not last very long. Oil inventories previously had time to build up significantly when OPEC acted slowly. When OPEC then finally made the cuts it would take some time to reverse the inventory build-up. So prices would stay lower for longer. Rapid action by OPEC+ today means that inventories won’t have time to build up to the same degree if everything goes wrong with the economy. Thus leading to much briefer sell-offs and sharper and faster re-bounds.
OPEC+ hasn’t really even started cutting yet. Yes, we have had some cuts announced with 1.5 m b/d reduction starting now in May. But this is only bringing Saudi Arabia’s oil production back to roughly its normal level around 10 m b/d following unusually high production of 11 m b/d in Sep 2022. So OPEC+ has lots of ”dry powder” for further cuts if needed.
OPEC reaction function: ”USD 70/b is the floor”. The most recent announced production cut gave a lot of information. It was announced on 2nd of April and super-fast following the 20th of March when Dated Brent traded to an intraday low of USD 69.27/b.
JMMC on 4 June and OPEC+ meeting on 5-6 July. Will cut if needed. OPEC+ will now spend the month of May to assess the effects of the newest cuts. The Joint Ministerial Monitoring Committee (JMMC) will then meet on 4 June and make a recommendation to the group. If it becomes clear at that time that further cuts are needed then we’ll likely get verbal intervention during June in the run-up to 5-6 July and then fresh cuts if needed.
Oil man Biden wants a price floor of USD 70/b as well. The US wants to rebuild its Strategic Petroleum Reserves (SPR) which now has been drawn down to about 50%. It stated in late 2022 that it wanted to buy if the oil price fell down to USD 67 – 72/b. Reason for this price level is of course that if it falls below that then US shale oil production would/could start to decline with deteriorating energy security for the US. Latest signals from the US administration is that the rebuilding of the SPR could start in Q3-23.
A note on shale oil activity vs. oil price. The US oil rig count has been falling since early December 2022 and has been doing so during a period when the Dated Brent price has been trading around USD 80/b.
IMF estimated social cost-break-even oil price for the different Middle East countries. As long as US shale oil production is not booming there should be lots of support within OPEC+ to cut production in order to maintain the oil price above USD 70/b. Thus the ”OPEC+ reaction-function” of a USD 70/b floor price. But USD 80/b would even satisfy Saudi Arabia.

US implied demand and products delivered is holding up nicely YoY and on par with 2019. So far at least. Seen from an aggregated level.

Total US crude and product stocks including SPR. Ticking lower. Could fall faster from May onward due to fresh cuts by OPEC+ of 1.5 m b/d

An oil price of USD 95/b in 2023 would place cost of oil to the global economy at 3.3% of Global GDP which is equal to the 2000 – 2019 average.

Analys
Mixed signals on demand but world will need more oil from OPEC but the group is cutting

A world where OPEC(+) is in charge is a very different world than we are used to during the ultra-bearish 2015-19 period where US shale AND offshore non-OPEC production both were booming. Brent averaged USD 58/b nominal and USD 70/b in real terms that period. The Brent 5yr contract is trading at USD 66/b nominal or USD 58.6/b in real-terms assuming no market power to OPEC+ in 2028. Could be, but we don’t think so as US Permian shale is projected by major players to peak next 5yrs. When OPEC(+) is in charge the group will cut according to needs. For Saudi that is around USD 85/b but maybe as high as USD 97/b if budget costs rise with inflation

No major revisions to outlook by the IEA last week in its monthly Oil Market Report.
Total demand to rise 2 m b/d, 90% of demand growth from non-OECD and 57% from Jet fuel. Total demand to rise by 2 m b/d YoY to 101.9 m b/d where 90% of the gain is non-OECD. Jet fuel demand to account for 57% of demand growth as global aviation continues to normalize post Covid-19. Demand for 2022 revised down by 0.1 m b/d and as a result so was the 2023 outlook (to 101.9 m b/d). Non-OPEC supply for 2023 was revised up by 0.1 m b/d. Call-on-OPEC 2023 was reduced by 0.2 m b/d as a result to 29.5 m b/d. Call-on-OPEC was 28.8 m b/d in Q4-22. The group produced 28.94 m b/d in Mar (Argus).
World will need more oil from OPEC. Call-on-OPEC to rise 1.6 m b/d from Q4-22 to Q4-23. IEA is forecasting a call-on-OPEC in Q4-23 of 30.4 m b/d. The world will thus need 1.6 m b/d more oil from OPEC YoY in Q4-23 and 0.46 m b/d more than it produced in March. Counter to this though the OPEC group decided to cut production by 1 m b/d from May to the end of the year. So from May onward the group will produce around 28 m b/d while call-on-OPEC will be 29.1 m b/d, 30.3 m b/d and 30.4 m b/d in Q2,3,4-23.
If the IEA is right about demand then the coming OPEC cuts should drive inventories significantly lower and oil prices higher.
But the market doesn’t quite seem to buy into this outlook. If it had then prices would have moved higher. Prices bumped up to USD 87.49/b intraday on 12 April but have since fallen back and Brent is falling back half a percent today to USD 85.9/b.
Market is concerned for declining OECD manufacturing PMI’s. It is of course the darkening clouds on the macro-sky which is making investors concerned about the outlook for oil products demand and thus crude oil demand. Cross-currents in global oil product demand is making the situation difficult to assess. On the one hand there are significant weakening signals in global diesel demand along with falling manufacturing PMIs. The stuff which makes the industrial world go round. Manufacturing, trucking, mining and heavy duty vehicles all need diesel. (Great Blbrg story on diesel here.) Historically recessions implies a cyclical trough in manufacturing activity, softer diesel demand and falling oil prices. So oil investors are naturally cautious about buying into the bull-story based on OPEC cuts alone.
Cross-currents is making demand growth hard to assess. But the circumstances are much more confusing this time around than in normal recession cycles because: 1) Global Jet fuel demand is reviving/recovering post Covid-19 and along with China’s recent reopening. IEA’s assessment is that 57% of global demand growth this year will be from Jet fuel. And 2) Manufacturing PMIs in China and India are rising while OECD PMIs are falling.
These cross-currents in the demand picture is what makes the current oil market so difficult to assess for everyone and why oil prices are not rallying directly to + USD 100/b. Investors are cautious. Though net-long specs have rallied 137 m b to 509 m b since the recent OPEC cuts were announced.
The world will need more oil from OPEC in 2023 but OPEC is cutting. The IEA is projecting that non-OPEC+ supply will grow by 1.9 m b/d YoY and OPEC+ will decline by 0.8 m b/d and in total that global supply will rise 1.2 m b/d in 2023. In comparison global demand will rise by 2.0 m b/d. At the outset this is a very bullish outlook but the global macro-backdrop could of course deteriorate further thus eroding the current projected demand growth of 2 m b/d. But OPEC can cut more if needed since latest cuts have only brought Saudi Arabia’s production down to its normal level.
OPEC has good reasons to cut production if it can. IEA expects global oil demand to rise 2 m b/d YoY in 2023 and that call-on-OPEC will lift 1.6 m b/d from Q4-22 to Q4-23. I.e. the world needs more oil from OPEC in 2023. But OPEC will likely produce closer to 28 m b/d from May to Dec following latest announced production cuts

Market has tightened with stronger backwardation and investors have increased their long positions

Net long specs in Brent + WTI has bounced since OPEC announcement on coming cuts.

Saudi Arabia’s fiscal cost-break-even was USD 85/b in 2021 projected the IMF earlier. Don’t know when it was projected, but looks like it was before 2020 and thus before the strong rise in inflation. If we add 15% US inflation to the 2021 number we get USD 97/b. Inflation should lift budget costs in Saudi Arabia as it is largely a USD based economy. Though Saudi Arabia’s inflation since Q4-19 is reported as 8% to data while Saudi cost-of-living-index is up by 11%. Good reason for Saudi Arabia to cut if it can cut without loosing market share to US shale.

Adjusting for inflation both on a backward and forward basis. The 5yr Brent price is today at USD 66.3/b but if we adjust for US 5yr inflation it is USD 58.6/b in real terms. That is basically equal to the average Brent spot price from 2015-2019 which was very bearish with booming shale and booming offshore non-OPEC. Market is basically currently pricing that Brent oil market in 5yrs time will be just as bearish as the ultra-bearish period from 2015-2019. It won’t take a lot to beat that when it comes to actual delivery in 2028.

Nominal Brent oil prices and 5yr Brent adj. for 5yr forward inflation expectations only

ARA Diesel cracks to Brent were exceptionally low in 2020/21 and exceptionally high in 2022. Now they are normalizing. Large additions to refining capacity through 2023 will increase competition in refining and reduce margins. Cuts by OPEC+ will at the same time make crude oil expensive. But diesel cracks are still significantly higher than normal. So more downside before back to normal is achieved.

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