Oil Insights with Harry Tchilinguirian | S1 E2

Welcome to the second episode of Oil Insights, hosted by Harry Tchilinguirian, Head of Research at Onyx, alongside co-hosts Mita Chaturvedi and Vincent Wu, members of the research team at Onyx.

The oil market started last week on a strong note, only to finish on a whimper trading sub-80s last Friday. Geopolitics early last week did help uplift prices, with fund positioning ready to add some more risk. But geopolitical premia seemed to deflate as diplomatic efforts were stepped up to try to secure a cease-fire in Gaza.
 
 The positive economic news from the US, such as strong retail sales, provided some optimism, but the main focus remained on China's weak economic data. China's industrial production, retail sales, in fixed investment were disappointing, alongside weaker crude runs and oil imports. US oil data from the EIA also showed an unexpected crude stock build, further pressuring oil prices. 

Brent remained stable, with no significant signs of change in supply. China reduced gasoline and diesel exports in July, and its refineries are likely to operate below expectations due to weak demand and export constraints. The future of crude demand in China and Asia is crucial, especially with OPEC+ potentially increasing supply in Q4. Refining margins are also struggling, particularly with gasoline and diesel.

As for swap market pricing, the DFL still remains quite strong, although slightly weak compared to this time, last week. It’s seen a combination of short-covering rally as well as, Trade Houses and Majors buying in the physical window, which drove up physical differentials indicating demand in the spot market in the near term. 

 Middle distillates have been interesting this week, with gasoil pressured due to the poor economic picture, seeing a poor economic picture across China, the United States, Europe and especially Germany, with extremely weak PMI data and industrial production.