Refinery Margins Tell Opec How Hard to Work

摘要

The physical crude oil market is still tight and Brent and Dubai time spreads signal this market is short prompt oil(p8).But the crude oil price strength is eroding: Refined product demand growth is weakening(p5)and non-Opec keeps pumping more oil(p3).To keep this market in a shallow supply deficit,Opec must throttle back production a little more than initially thought in the second half of 2019 and keep it at the 30 million barrels per day of the first half(p2).Opec is capable of doing that(p4).What this tightness will do to the oil price depends much on market sentiment(OMI Jun.18'19).The overbearing gloomy macro sentiment that hangs over the wider financial market obscures the impact of oil fundamentals.Not that these fundamentals are overly clear.Oil's outlook is uncertain,with supply either plentiful from US shale or disrupted by a conflict in the Mideast and oil demand under the spell of a potential recession.Supply is straightforward,demand sees subtleties.Could it be that the soft growth of oil demand in the first half of the year is already proof that the expected recession has arrived? Or,more structural,could it be that the "energy transition" is already further along in the real world and lowering oil demand?