Oil prices took a bumpy ride this morning, stumbling in the face of uncertain demand while trying to find balance with China’s benchmark lending rate cut. Brent crude dropped by 1.2%, or 92 cents, landing at $75.17 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude for July decreased by $1.51 from Friday’s closing, settling at $70.42 per barrel. There was no settlement on Monday due to the Juneteenth holiday.
In the global market, all eyes are on China as it continues to import high amounts of Russian crude oil, breaking records with each passing month. By the end of June, it is expected to receive 1.5 million barrels per day of Russian crude oil by sea, marking a 6% increase from the previous month and the highest import level since 2017. However, Russian crude flows to international markets continue to decline. Germany, for example, has recently entered into an agreement with Kazakhstan to import 100,000 barrels per day of crude oil until the end of 2024, expanding Europe’s search for alternatives to Russian crude oil.
Monitoring trading activity can provide insights into how the market expects current trends to play out. Portfolio investors appear to be shifting their positions from crude oil to middle distillates. They are trying to anticipate that low levels of distillate inventories will keep prices relatively stable, even if global economic growth slows down. Hedge funds and money managers have sold around 21 million barrels of crude oil options and futures while purchasing 18 million barrels of products, including 14 million barrels of distillates, in the week ending June 13th. This shift has been particularly prominent from US crude to European gas oil, reflecting rising crude inventories in the United States and relatively low stocks of distillates worldwide.
Overall, crude futures continue to show volatility, with Brent prices and WTI prices experiencing a slight decline. China’s increasing imports of Russian crude oil and Germany’s deal with Kazakhstan to diversify crude sources highlight ongoing developments in the global market. Additionally, shifts in investment positions from crude oil to distillates indicate investor anticipation of stable prices amidst economic fluctuations.