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Crude Oil Futures Shed Overnight Gains

by Carl Steward
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OilCrude Oil Futures Shed Overnight Gains

Crude oil futures were lower in mid-morning trade in Asia on June 17, following a negative session on Wall Street overnight, as recession fears persisted despite global central banks tightening monetary policy.

The ICE August Brent futures contract was down 57 cents/b (0.48 percent) at $119.24/b from its previous level; meanwhile, the NYMEX July light sweet crude contract was down 67 cents/b (0.57 percent) at $116.92/b.

Concerns about a global recession have grown as central banks tighten monetary policy to combat rising prices.

Following the US Federal Reserve’s historic 75-basis-point boost in its target fed funds rate on June 15, the Swiss National Bank and the Bank of England raised interest rates on June 16; this sent Wall Street indices down overnight.

The overall negative tone on Wall Street carried over into the Asian session. It should stay under pressure in the lack of any positive catalysts for the time being.

The OPEC+ group fell 2.695 million barrels per day (BPD) short of its overall crude oil production target in May due to Western sanctions on Russia and capacity restrictions at numerous other producers unable to meet quotas, according to an OPEC+ document obtained by Reuters on Thursday.

According to estimations from secondary sources included in the OPEC+ paper, there was a more significant deficit in overall output at OPEC+ countries last month compared to the group’s aim. Compliance with the cutbacks increased to 256 percent in May; up from 220 percent in April; this indicated that OPEC+’s underproduction problem became worse as the target rose to 432,000 BPD last month.

Russia, the OPEC+ pact’s largest non-OPEC producer, increased production slightly in May compared to April; although it remained far below the Russian objective set by the agreement. Russian crude oil production plummeted in March and April due to self-sanctioning, sanctions, and now an EU embargo following Russia’s invasion of Ukraine.

Russian crude oil output recovered somewhat in May. Russia pumped 9.273 million barrels per day of crude last month, up from 9.159 million barrels per day in April. However, Russian output was still well behind the plan, falling by as much as 1.276 million BPD in May. Among all OPEC+ producers, this was the most significant underperformance compared to targets.

Norway and Russia

Norway Oil Sector

Union members have until June 30 to vote on whether to accept or reject the agreement by a simple majority. According to Rest, if turnout falls below 50%, the union’s leadership will decide whether or not to strike.

Lederne, the other union seeking permission from members, did not respond to calls for comment. Industri Energi, the third union, involved in the talks, adopted the agreement without soliciting approval from its members. Under the agreement, offshore workers directly hired by field companies such as Equinor, Aker BP, or ConocoPhillips will see their yearly earnings jump by 32,200 crowns ($3,207). Furthermore, offshore drilling and catering enterprises workers will receive an additional 6,238 crowns per year; increasing their total compensation to 38,438 crowns.

Russian gas supplies to Europe via the Nord Stream 1 pipeline decreased further on Thursday, with Moscow warning that additional delays in repairs could result in the suspension of all shipments, putting a halt to Europe’s rush to replenish its gas reserves.

The slowing flows occurred as the presidents of Germany, Italy, and France visited Ukraine, requesting faster weapons supply to combat invading Russian soldiers and seeking support for Kyiv’s bid to join the European Union.

The salary increase is higher than the 3.7 percent agreed upon in April by Norway’s leading labor and employer organizations; it serves as the standard for sectoral wage negotiations in Norway.

However, since that agreement, inflation in Norway has accelerated, with core inflation climbing to 5.7 percent in May. The agency predicts prices to rise 4.7 percent in 2022, up from 3.3 percent in March.

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