Analys
Unlikely that Saudi switches from ”price” to ”volume” any time soon

Small gains with low conviction this morning. But we don’t think Brent can resist the upside. Brent crude rebounded 0.9% ydy with a close at USD 77.99/b following the sharp selloff last week on signals that a ceasefire in Gaza could be in the cards. This morning Brent crude is inching higher by 0.2% to USD 78.1/b without great conviction early in the morning it seems. Shanghai and Hong Kong equities are however up 3-4% this morning and industrial metals follows suites with some positive backdrop. The Chinese equity gains this morning may be more due to Chinese government technical measures to stem the equity market route than from real growth fundamentals. The general view of SEB’s Chief Asia Strategist, Eugenia Victorino, is however that the Chinese government these days has shifted fully to growth focus. Positive surprises from China are in the cards for 2024 in her view. While oil seems a little bewildered on where to go this morning, we think it won’t be able to resist the upside. The selloff last week on the possible ceasefire in Gaza followed by hopeful qualm in the Red Sea, Houthis, Hezbollah, Hamas, Iran, the lot seems way premature in our view.

No Chance that Saudi/OPEC+ will fold their cards now that we see emerging signs of global revival. The great concern now for a long time has been that the incredible rise in interest rates (US+++) would lead to a recession which would kill oil demand cyclically and possible force Saudi/OPEC+ to fold their cards, increase production, let the oil price fall and thus reduce US shale oil production to a more suitable level.
The latest manufacturing PMIs are however very interesting reading. India is of course full steam ahead at 56.5. But suddenly South Korea has moved up above the 50-line to 51.2. SEB’s prior economist in Norway, Stein Bruun, used to say that South Korea manufacturing PMI is the ”Canary in the coal mine” as the whole world needs manufactured sub-components from the country. So when the world starts to accelerate it will be visible in South Korea to start with. US ”new orders” has jumped to 52.5, the global PMI has lifted to 50.0 and the EU is ticking higher (still below 50) month by month as the cost of natural gas now has come down just an inch from the real average price from 2010-2019.
These emerging signs of improvements is essentially what Saudi/OPEC+ has been hoping for and dreaming about: Global economic acceleration. It almost seems too good to be true amid high interest rates, geopolitical turmoil, EU energy crisis and Chinese property market problems. Still, that is what the PMIs seems to indicate.
There is no chance in h*** that Saudi/OPEC+ will cave in and switch from ”price over volume” to ”volume over price” with emerging signs on the horizon of a global revival. It implies a stronger demand impulse down the road. And if you look upon the world economy with the eyes of an optimist your take would probably be: Chinese policy has shifted focus to growth, Biden is stimulating the h*** out of the US economy with his infrastructure stimulus package (to be re-elected), the EU is crawling out of the woods as nat gas prices have come down towards the real, 2010-2019 average level, India marches on, inflation globally is fading and interest rate cuts are coming.
I.e. the risk for a sudden drop in the oil price as a consequence of a possible shift from price to volume by Saudi/OPEC+ seems highly unlikely at present.
Global manufacturing PMIs

Speculators tend to build long positions when global manufacturing accelerates and reduce when it contracts. Net long specs will likely be in for an upturn if global manufacturing starts to expand again.

Is Biden stimulating his way to re-election? Projection for US cement consumption to 2027 gives a great reflection of the incredible magnitude of Biden’s infrastructure package.

Saudi Arabia Official Selling prices. Only marginal changes for March.

Analys
Crude stocks fall again – diesel tightness persists

U.S. commercial crude inventories posted another draw last week, falling by 2.4 million barrels to 418.3 million barrels, according to the latest DOE report. Inventories are now 6% below the five-year seasonal average, underlining a persistently tight supply picture as we move into the post-peak demand season.

While the draw was smaller than last week’s 6 million barrel decline, the trend remains consistent with seasonal patterns. Current inventories are still well below the 2015–2022 average of around 449 million barrels.
Gasoline inventories dropped by 1.2 million barrels and are now close to the five-year average. The breakdown showed a modest increase in finished gasoline offset by a decline in blending components – hinting at steady end-user demand.
Diesel inventories saw yet another sharp move, falling by 1.8 million barrels. Stocks are now 15% below the five-year average, pointing to sustained tightness in middle distillates. In fact, diesel remains the most undersupplied segment, with current inventory levels at the very low end of the historical range (see page 3 attached).
Total commercial petroleum inventories – including crude and products but excluding the SPR – fell by 4.4 million barrels on the week, bringing total inventories to approximately 1,259 million barrels. Despite rising refinery utilization at 94.6%, the broader inventory complex remains structurally tight.
On the demand side, the DOE’s ‘products supplied’ metric – a proxy for implied consumption – stayed strong. Total product demand averaged 21.2 million barrels per day over the last four weeks, up 2.5% YoY. Diesel and jet fuel were the standouts, up 7.7% and 1.7%, respectively, while gasoline demand softened slightly, down 1.1% YoY. The figures reflect a still-solid late-summer demand environment, particularly in industrial and freight-related sectors.


Analys
Increasing risk that OPEC+ will unwind the last 1.65 mb/d of cuts when they meet on 7 September

Pushed higher by falling US inventories and positive Jackson Hall signals. Brent crude traded up 2.9% last week to a close of $67.73/b. It traded between $65.3/b and $68.0/b with the low early in the week and the high on Friday. US oil inventory draws together with positive signals from Powel at Jackson Hall signaling that rate cuts are highly likely helped to drive both oil and equities higher.

Ticking higher for a fourth day in a row. Bank holiday in the UK calls for muted European session. Brent crude is inching 0.2% higher this morning to $67.9/b which if it holds will be the fourth trading day in a row with gains. Price action in the European session will likely be quite muted due to bank holiday in the UK today.
OPEC+ is lifting production but we keep waiting for the surplus to show up. The rapid unwinding of voluntary cuts by OPEC+ has placed the market in a waiting position. Waiting for the surplus to emerge and materialize. Waiting for OECD stocks to rise rapidly and visibly. Waiting for US crude and product stocks to rise. Waiting for crude oil forward curves to bend into proper contango. Waiting for increasing supply of medium sour crude from OPEC+ to push sour cracks lower and to push Mid-East sour crudes to increasing discounts to light sweet Brent crude. In anticipation of this the market has traded Brent and WTI crude benchmarks up to $10/b lower than what solely looking at present OECD inventories, US inventories and front-end backwardation would have warranted.
Quite a few pockets of strength. Dubai sour crude is trading at a premium to Brent crude! The front-end of the crude oil curves are still in backwardation. High sulfur fuel oil in ARA has weakened from parity with Brent crude in May, but is still only trading at a discount of $5.6/b to Brent versus a more normal discount of $10/b. ARA middle distillates are trading at a premium of $25/b versus Brent crude versus a more normal $15-20/b. US crude stocks are at the lowest seasonal level since 2018. And lastly, the Dubai sour crude marker is trading a premium to Brent crude (light sweet crude in Europe) as highlighted by Bloomberg this morning. Dubai is normally at a discount to Brent. With more medium sour crude from OPEC+ in general and the Middle East specifically, the widespread and natural expectation has been that Dubai should trade at an increasing discount to Brent. the opposite has happened. Dubai traded at a discount of $2.3/b to Brent in early June. Dubai has since then been on a steady strengthening path versus Brent crude and Dubai is today trading at a premium of $1.3/b. Quite unusual in general but especially so now that OPEC+ is supposed to produce more.
This makes the upcoming OPEC+ meeting on 7 September even more of a thrill. At stake is the next and last layer of 1.65 mb/d of voluntary cuts to unwind. The market described above shows pockets of strength blinking here and there. This clearly increases the chance that OPEC+ decides to unwind the remaining 1.65 mb/d of voluntary cuts when they meet on 7 September to discuss production in October. Though maybe they split it over two or three months of unwind. After that the group can start again with a clean slate and discuss OPEC+ wide cuts rather than voluntary cuts by a sub-group. That paves the way for OPEC+ wide cuts into Q1-26 where a large surplus is projected unless the group kicks in with cuts.
The Dubai medium sour crude oil marker usually trades at a discount to Brent crude. More oil from the Middle East as they unwind cuts should make that discount to Brent crude even more pronounced. Dubai has instead traded steadily stronger versus Brent since late May.

The Brent crude oil forward curve (latest in white) keeps stuck in backwardation at the front end of the curve. I.e. it is still a tight crude oil market at present. The smile-effect is the market anticipation of surplus down the road.

Analys
Brent edges higher as India–Russia oil trade draws U.S. ire and Powell takes the stage at Jackson Hole

Best price since early August. Brent crude gained 1.2% yesterday to settle at USD 67.67/b, the highest close since early August and the second day of gains. Prices traded to an intraday low of USD 66.74/b before closing up on the day. This morning Brent is ticking slightly higher at USD 67.76/b as the market steadies ahead of Fed Chair Jerome Powell’s Jackson Hole speech later today.

No Russia/Ukraine peace in sight and India getting heat from US over imports of Russian oil. Yesterday’s price action was driven by renewed geopolitical tension and steady underlying demand. Stalled ceasefire talks between Russia and Ukraine helped maintain a modest risk premium, while the spotlight turned to India’s continued imports of Russian crude. Trump sharply criticized New Delhi’s purchases, threatening higher tariffs and possible sanctions. His administration has already announced tariff hikes on Indian goods from 25% to 50% later this month. India has pushed back, defending its right to diversify crude sourcing and highlighting that it also buys oil from the U.S. Moscow meanwhile reaffirmed its commitment to supply India, deepening the impression that global energy flows are becoming increasingly politicized.
Holding steady this morning awaiting Powell’s address at Jackson Hall. This morning the main market focus is Powell’s address at Jackson Hole. It is set to be the key event for markets today, with traders parsing every word for signals on the Fed’s policy path. A September rate cut is still the base case but the odds have slipped from almost certainty earlier this month to around three-quarters. Sticky inflation data have tempered expectations, raising the stakes for Powell to strike the right balance between growth concerns and inflation risks. His tone will shape global risk sentiment into the weekend and will be closely watched for implications on the oil demand outlook.
For now, oil is holding steady with geopolitical frictions lending support and macro uncertainty keeping gains in check.
Oil market is starting to think and worry about next OPEC+ meeting on 7 September. While still a good two weeks to go, the next OPEC+ meeting on 7 September will be crucial for the oil market. After approving hefty production hikes in August and September, the question is now whether the group will also unwind the remaining 1.65 million bpd of voluntary cuts. Thereby completing the full phase-out of voluntary reductions well ahead of schedule. The decision will test OPEC+’s balancing act between volume-driven influence and price stability. The gathering on 7 September may give the clearest signal yet of whether the group will pause, pivot, or press ahead.
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