The price of Brent crude ended the week at $81.07 after closing the previous week at $79.87. The price of WTI ended the week at $77.02 after closing the previous week at $75.32. Crude prices in Asia are showing more strength than in the Atlantic Basin.
Despite the increase in the price of Brent crude, the price of Brent remains below the 200-day moving average because of concerns about the global economy and the strength of oil demand. In our latest quarterly forecast, we have lowered demand growth to 1.90 million bbl/d in comparison to 2022 from our previous forecast of 2.11 million bbl/d. Additionally, while there are announced production cuts by some members of OPEC+, other producers have been increasing production. Libya’s production has been restored since the disruption earlier this month from internal conflict. Nigeria’s production reached nearly 1.25 million bbl/d in June, which is an increase of 25,000 bbl/d in comparison to May, and Nigeria is looking to increase production to 1.7 million bbl/d by November of this year. Furthermore, Venezuela increased its oil exports in June to around 716,000 bbl/d, which is an increase of 8% above its May exports. In contrast, US oil production remained unchanged last week at 12.3 million bbl/d. Additionally, the number of operating oil rigs in the US decreased by 7 and now stands at 530 rigs, which compares to the pre-COVID level of 683 that occurred during the week of March 13, 2020. (For a detailed assessment of the US shale sector please refer to our Enhanced Shale Service and our latest quarterly update.)
The US economy continues to provide mixed signals. The GDPnow model from the Atlanta Federal Reserve is estimating that real GDP growth for 2Q 2023 is 2.4%. Retail sales during 2Q in real terms increased by 1.9% and are trending 6% above the pre-crisis trend. Single-family housing permits increased by 11% in 2Q 2023, and total housing units under construction are near a record, despite elevated interest rates. Conversely, the Leading Economic Index provided by the Conference Board decreased by 0.7% in June, which is the 15th consecutive month of decreases—the longest period since the period prior to the 2007-2009 recession. Additionally, the rate of decrease is increasing with the index decreasing by 4.2% during the last six months, which compares to a 3.8% for the previous six months. The ISM Manufacturing PMI in the United States decreased from 46.9 in May to 46 in June 2023 and has been less than 50 since November 2022 (readings less than 50 indicate contraction). Additionally, decreases were seen with the following indicators: new orders (42.6 vs 45.6), production (46.7 vs 51.1), employment (48.1 vs 51.4), inventories (44 vs 45.8) and backlog of orders (38.7 vs 37.5). Another sign of a weakening economy is the stagnating diesel demand. In comparison with 2019, diesel demand is running 7.70% less during the last four week and 9.33% less than in 2022.
The growing dependency of the US economy on consumer spending highlights a risk while the Federal Reverse is still intent on increasing interest rates to bring down inflation. Consumer debt is at an all-time high, as is the interest rate being applied to the debt. Additionally, the job market is cooling with a slowing rate of job additions in 2023, which has decreased significantly from 2022 (399,000 monthly to 278,000).
For the upcoming week, we are expecting that the price of Brent crude will remain below $82.00.
For a complete forecast of refined products and prices, please refer to our Short-term Outlook.
About the Author: John E. Paise, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.
2023-10-09 - The Phillips 66 dividend will be payable on Dec. 1 to shareholders on record as of Nov. 17.
2023-09-15 - Eversource Energy announced on Sept. 15 a regular quarterly dividend of $0.675 per share.
2023-11-20 - Halliburton’s dividend is payable on Dec. 27 to shareholders of record by Dec. 7.
2023-10-06 - Murphy Oil’s cash dividend will be payable on Dec. 1 to stockholders on record as of Nov. 13.
2023-11-17 - Granite Ridge’s dividend is payable on Dec. 15 to shareholders of record by Dec. 1.