CRUDE WRAP: WTI (V2) SETTLES USD 1.15 HIGHER AT 94.89/BBL; BRENT (V2) SETTLES USD 1.00 HIGHER AT 101.22/BBL

Analysis details (19:33)

Oil prices were very volatile Wednesday amid the overhang from OPEC production cut warnings, big US crude stock draws, weak gasoline demand, Russian price cap retaliation, and reports that the US rejected Iran's requests. The earlier threats from Saudi that OPEC could cut production were given colour today by Argus, citing five OPEC+ sources, saying that a formal proposal to reduce production is not on the table, but did warn cuts are possible "if needed", with some sources noting the decision might be made if the Iran deal is revived/Iranian crude export restrictions removed. Meanwhile, supply risk out of Kazakhstan continues to be a thorn in the supply chain with Reuters reporting Black Sea CPC blend crude oil exports have fallen 32% behind schedule so far in August amid Kashagan oilfield maintenance and terminal repairs.

IRAN: After Iran's Foreign Ministry announced it had received the US' response to its nuclear deal, Al-Arabiya reported that the US had rejected Iran's additional demands, suggestive of no deal as it stands. The US reportedly said Iran should not be allowed to enrich uranium beyond a purity level of 4%. That echoed earlier WSJ sources that said the US was unlikely to accept Tehran's demands. Al Arabiya added late that Europeans are in contact with the parties to the agreement to hold a new round of talks. Said differently, back to the drawing board. However, an Iranian Professor flagged by WSJ's Norman suggested the claim it was rejected is false.

PRICE CAP: Bloomberg reported Russia is mulling oil discounts of up to 30% with Asian nations in response to the West's price cap push. Note that follows early August reports in Politico that US Treasury officials are targeting December 5th for the implementation of a price cap scheme on Russian oil in the range of USD 40-60bbl, though officials were said to be determined to keep it above Russia's cost of production which sits around USD 45/bbl. With front-month Brent trading at c. USD 100bln, Russia would be offering oil to Asia at the USD 70/bbl region if it goes ahead with the plans.  

INVENTORIES: EIA confirmed market expectations for a 3.3mln bbl crude stock draw in the latest week, although given the record 8.1mln SPR release, the net draw marked a massive 11.4mln bbls, the largest draw since April. Crude production fell again by 100k BPD to 12mln, while Cushing, Oklahoma stocks built 0.4mln bbls for the eighth straight week. The products saw draws too but were much smaller, while refinery utilisation rose 0.3%. Bloomberg reported that gasoline demand dropped off sharply, with the four-week demand rolling basis falling by 2.24% to 8.86mln BPD, barely above the same period in 2020.

24 Aug 2022 - 19:33- EnergyResearch Sheet- Source: Newsquawk