Analys
Brent crude tipping over the technical abyss


Brent crude ydy closed down 1.5% at $58.94/bl. That was the lowest level since early January, below the lows from June and below the technically important Fibonacci price level of $59.74/bl below which there is no real support before the $50/bl line. This abyss or lack of technical support below $59.74/bl has been high on the radar of many of our customers for a long time and now we have broken down below that level with an open abyss down to the $50/bl line.
Oil producers may pray that tight front end fundamentals and continued declining US crude oil stocks may save them but as of now the bearish and deteriorating global macro situation seems to have the upper hand, pushing lower and lower.

US crude oil stocks have now fallen 7 weeks in a row since early June with a total decline of 49 million barrels. API ydy released partial, indicative numbers pointing to yet another weekly draw in US crude stocks of 3.4 m bl, with Cushing crude stocks down 1.6 m bl, Gasoline stocks down 1.1 m bl and distillates stocks up 1.2 m bl.
So US crude oil stocks are likely to continue lower together with a range of other bullish elements: Mid-East geopolitical risk is likely to continue at an elevated level, OPEC+ will likely continue to hold back, US production growth will continue to slow further and refinery margins are likely to stay strong due to the IMO 2020 event. But the bearish macro sentiment still has the upper hand for now pushing lower.
Last time we were at the current price level in early January the spot market was plentiful but the market was optimistic of the future. Now the spot market is tight with both the Brent and WTI crude curves in front-end backwardation. But since the market is very pessimistic of the future macro situation and future oil demand it has pushed the whole front end of the crude oil curve lower so that backwardated part of the curve now is below the longer dated contracts.
This is unlikely to change before we either get a major outage of supply giving an even stronger bullish force to the front end of the market or the macro sentiment turns from a bearish trend to a bullish trend. A partial or full stop in the flow of oil out of the Strait of Hurmuz would be bullish supply event which undoubtedly would drive the front end to the sky. A full or partial resolution to the ongoing US – China trade war would definitely be a turn to the positive from the macro side.
For now the bearish macro sentiment continues to push down the whole forward curve for both Brent and WTI paying little attention of the tight front end of the market. The US Fed did not rescue the macro situation. It was not enough to change the direction of the cooling global growth trend. Instead Donald Trump has upped the US – China trade war making it all worse.
While slowing US crude oil production growth is good for the global oil market balance it is not entirely positive for Brent crude in the first round of events.
Much more US pipeline capacity from the Permian basin to the US Gulf in combination with slowing US crude oil production growth implies that Brent crude oil prices will move much closer to the WTI crude curve. I.e. global oil producers will lose the Brent crude oil premium over WTI which averaged $8.3/bl on average so far in 2019 and averaged $6.8/bl in 2018.
Lately we have seen marginal cost for transporting oil from the Permian to the US Gulf of $2.5/bl. So that is probably the Brent to WTI price spread we are heading towards.
The ongoing price dynamics shows how difficult it is for OPEC+ to prop up prices through production cuts in the face of cooling global growth. It was much easier when they initiated cuts in late 2016 with strong tailwind from accelerating global growth.
Ch1: The Brent crude oil forward curves in early January (green) versus now (yellow). Plentiful spot supply in January but coupled with a fairly positive view of the future. Today the spot market is tight in the front but the bearish macro sentiment is very bad. I.e. deep concerns for future demand is pushing down the whole forward crude curve

Ch2: Brent crude losing more and more of its premium over WTI. Here the spread between the two forward curves at the end of June versus the close yesterday. Brent had a premium of $6.8/bl in 2018 and $8.3/bl ytd average in 2019.

Ch3: Brent front month breaking down below the 38.2% Fibo level with basically open space down to the $50/bl line. I.e. Brent crude oil price is extremely vulnerable to the downside and to further deterioration in the global macro sentiment.

Analys
Quadruple whammy! Brent crude down $13 in four days

Brent Crude prices continued their decline heading into the weekend. On Friday, the price fell another USD 4 per barrel, followed by a further USD 3 per barrel drop this morning. This means Brent crude oil prices have crashed by a whopping USD 13 per barrel (-21%) since last Wednesday high, marking a significant decline in just four trading days. As of now, Brent crude is trading at USD 62.8 per barrel, its lowest point since February 2021.

The market has faced a ”quadruple whammy”:
#1: U.S. Tariffs: On Wednesday, the U.S. unveiled its new package of individual tariffs. The market reacted swiftly, as Trump followed through on his promise to rebalance the U.S. trade position with the world. His primary objective is a more balanced trade environment, which, naturally, weakened Brent crude prices. The widespread imposition of strict tariffs is likely to fuel concerns about an economic slowdown, which would weaken global oil demand. This macroeconomic uncertainty, especially regarding tariffs, calls for caution about the pace of demand growth.
#2: OPEC+ hike: Shortly after, OPEC+ announced plans to raise production in May by 41,000 bpd, exceeding earlier expectations with a three-monthly increment. OPEC emphasized that strong market fundamentals and a positive outlook were behind the decision. However, the decision likely stemmed from frustration within the cartel, particularly after months of excess production from Kazakhstan and Iraq. Saudi Arabia’s Energy Minister seemed to have reached his limit, emphasizing that the larger-than-expected May output hike would only be a “prelude” if those countries didn’t improve their performance. From Saudi Arabia’s perspective, this signals: ”All comply, or we will drag down the price.”
#3: China’s retaliation: Last Friday, even though the Chinese market was closed, firm indications came from China on how it plans to handle the U.S. tariffs. China is clearly meeting force with force, imposing 34% tariffs on all U.S. goods. This move raises fears of an economic slowdown due to reduced global trade, which would consequently weaken global oil demand going forward.
#4: Saudi price cuts: At the start of this week, oil prices continued to drop after Saudi Arabia slashed its flagship crude price by the most in over two years. Saudi Arabia reduced the Arab Light OSP by USD 2.3 per barrel for Asia in May, while prices to Europe and the U.S. were also cut.
These four key factors have driven the massive price drop over the last four trading days. The overarching theme is the fear of weaker demand and stronger supply. The escalating trade war has raised concerns about a potential global recession, leading to weaker demand, compounded by the surprisingly large output hike from OPEC+.
That said, it’s worth questioning whether the market is underestimating the risk of a U.S.-Iran conflict this year.
U.S. military mobilization and Iran’s resistance to diplomacy have raised the risk of conflict. Efforts to neutralize the Houthis suggest a buildup toward potential strikes on Iran. The recent Liberation Day episode further underscores that economic fallout is not a constraint for Trump, and markets may be underestimating the threat of war in the Middle East.
With this backdrop, we continue to forecast USD 70 per barrel for this year (2025). For reference, Brent crude averaged USD 75 per barrel in Q1-2025.
Analys
Lowest since Dec 2021. Kazakhstan likely reason for OPEC+ surprise hike in May

Collapsing after Trump tariffs and large surprise production hike by OPEC+ in May. Brent crude collapsed yesterday following the shock of the Trump tariffs on April 2 and even more so due to the unexpected announcement from OPEC+ that they will lift production by 411 kb/d in May which is three times as much as expected. Brent fell 6.4% yesterday with a close of USD 70.14/b and traded to a low of USD 69.48/b within the day. This morning it is down another 2.7% to USD 68.2/b. That is below the recent low point in early March of USD 68.33/b. Thus, a new ”lowest since December 2021” today.

Kazakhstan seems to be the problem and the reason for the unexpected large hike by OPEC+ in May. Kazakhstan has consistently breached its production cap. In February it produced 1.83 mb/d crude and 2.12 mb/d including condensates. In March its production reached a new record of 2.17 mb/d. Its crude production cap however is 1.468 mb/d. In February it thus exceeded its production cap by 362 kb/d.
Those who comply are getting frustrated with those who don’t. Internal compliance is an important and difficult issue when OPEC+ is holding back production. The problem naturally grows the bigger the cuts are and the longer they last as impatience grows over time. The cuts have been large, and they have lasted for a long time. And now some cracks are appearing. But that does not mean they cannot be mended. And it does not imply either that the group is totally shifting strategy from Price to Volume. It is still a measured approach. Also, by lifting all caps across the voluntary cutters, Kazakhstan becomes less out of compliance. Thus, less cuts by Kazakhstan are needed in order to become compliant.
While not a shift from Price to Volume, the surprise hike in May is clearly a sign of weakness. The struggle over internal compliance has now led to a rupture in strategy and more production in May than what was previously planned and signaled to the market. It is thus natural to assign a higher production path from the group for 2025 than previously assumed. Do however remember how quickly the price war between Russia and Saudi Arabia ended in the spring of 2020.
Higher production by OPEC+ will be partially countered by lower production from Venezuela and Iran. The new sanctions towards Iran and Venezuela can to a large degree counter the production increase from OPEC+. But to what extent is still unclear.
Buy some oil calls. Bullish risks are never far away. Rising risks for US/Israeli attack on Iran? The US has increased its indirect attacks on Iran by fresh attacks on Syria and Yemen lately. The US has also escalated sanctions towards the country in an effort to force Iran into a new nuclear deal. The UK newspaper TheSun yesterday ran the following story: ”ON THE BRINK US & Iran war is ‘INEVITABLE’, France warns as Trump masses huge strike force with THIRD of America’s stealth bombers”. This is indeed a clear risk which would lead to significant losses of supply of oil in the Middle East and probably not just from Iran. So, buying some oil calls amid the current selloff is probably a prudent thing to do for oil consumers.
Brent crude is rejoining the US equity selloff by its recent collapse though for partially different reasons. New painful tariffs from Trump in combination with more oil from OPEC+ is not a great combination.

Analys
Tariffs deepen economic concerns – significantly weighing on crude oil prices

Brent crude prices initially maintained the gains from late March and traded sideways during the first two trading days in April. Yesterday evening, the price even reached its highest point since mid-February, touching USD 75.5 per barrel.

However, after the U.S. president addressed the public and unveiled his new package of individual tariffs, the market reacted accordingly. Overnight, Brent crude dropped by close to USD 4 per barrel, now trading at USD 71.6 per barrel.
Key takeaways from the speech include a baseline tariff rate of 10% for all countries. Additionally, individual reciprocal tariffs will be imposed on countries with which the U.S. has the largest trade deficits. Many Asian economies end up at the higher end of the scale, with China facing a significant 54% tariff. In contrast, many North and South American countries are at the lower end, with a 10% tariff rate. The EU stands at 20%, which, while not unexpected given earlier signals, is still disappointing, especially after Trump’s previous suggestion that there might be some easing.
Once again, Trump has followed through on his promise, making it clear that he is serious about rebalancing the U.S. trade position with the world. While some negotiation may still occur, the primary objective is to achieve a more balanced trade environment. A weaker U.S. dollar is likely to be an integral part of this solution.
Yet, as the flow of physical goods to the U.S. declines, the natural question arises: where will these goods go? The EU may be forced to raise tariffs on China, mirroring U.S. actions to protect its industries from an influx of discounted Chinese goods.
Initially, we will observe the effects in soft economic data, such as sentiment indices reflecting investor, industry, and consumer confidence, followed by drops in equity markets and, very likely, declining oil prices. This will eventually be followed by more tangible data showing reductions in employment, spending, investments, and overall economic activity.
Ref oil prices moving forward, we have recently adjusted our Brent crude price forecast. The widespread imposition of strict tariffs is expected to foster fears of an economic slowdown, potentially reducing oil demand. Macroeconomic uncertainty, particularly regarding tariffs, warrants caution regarding the pace of demand growth. Our updated forecast of USD 70 per barrel for 2025 and 2026, and USD 75 per barrel for 2027, reflects a more conservative outlook, influenced by stronger-than-expected U.S. supply, a more politically influenced OPEC+, and an increased focus on fragile demand.
___
US DOE data:
Last week, U.S. crude oil refinery inputs averaged 15.6 million barrels per day, a decrease of 192 thousand barrels per day from the previous week. Refineries operated at 86.0% of their total operable capacity during this period. Gasoline production increased slightly, averaging 9.3 million barrels per day, while distillate (diesel) production also rose, averaging 4.7 million barrels per day.
U.S. crude oil imports averaged 6.5 million barrels per day, up by 271 thousand barrels per day from the prior week. Over the past four weeks, imports averaged 5.9 million barrels per day, reflecting a 6.3% year-on-year decline compared to the same period last year.
The focus remains on U.S. crude and product inventories, which continue to impact short-term price dynamics in both WTI and Brent crude. Total commercial petroleum inventories (excl. SPR) increased by 5.4 million barrels, a modest build, yet insufficient to trigger significant price movements.
Commercial crude oil inventories (excl. SPR) rose by 6.2 million barrels, in line with the 6-million-barrel build forecasted by the API. With this latest increase, U.S. crude oil inventories now stand at 439.8 million barrels, which is 4% below the five-year average for this time of year.
Gasoline inventories decreased by 1.6 million barrels, exactly matching the API’s reported decline of 1.6 million barrels. Diesel inventories rose by 0.3 million barrels, which is close to the API’s forecast of an 11-thousand-barrel decrease. Diesel inventories are currently 6% below the five-year average.
Over the past four weeks, total products supplied, a proxy for U.S. demand, averaged 20.1 million barrels per day, a 1.2% decrease compared to the same period last year. Gasoline supplied averaged 8.8 million barrels per day, down 1.9% year-on-year. Diesel supplied averaged 3.8 million barrels per day, marking a 3.7% increase from the same period last year. Jet fuel demand also showed strength, rising 4.2% over the same four-week period.


-
Nyheter4 veckor sedan
USA är världens största importör av aluminium
-
Analys4 veckor sedan
Crude oil comment: Unable to rebound as the US SPX is signaling dark clouds on the horizon
-
Analys4 veckor sedan
Crude oil comment: Not so fragile yet. If it was it would have sold off more yesterday
-
Analys2 veckor sedan
Crude oil comment: Ticking higher as tariff-panic eases. Demand growth and OPEC+ will be key
-
Analys3 veckor sedan
Oil prices climb, but fundamentals will keep rallies in check
-
Nyheter2 veckor sedan
Ett samtal om råvarorna som behövs för batterier
-
Analys2 veckor sedan
Crude prices hold gains amid fresh tariff threats
-
Nyheter2 veckor sedan
Tysklands SEFE skriver avtal om att köpa 1,5 miljarder ton LNG per år från Delfin i USA