Saudi Arabia and Russia are putting pressure on OPEC scofflaws threatening not to have a June 5th meeting to talk about production cuts. This is strange because word has it that the group has already decided to extend cuts for another month. Still, Saudi Arabia, which has over complied to cuts, could add over a million barrels of oil a day to the equation and pressure OPEC cheaters.
Javier Blas points out that, “From the high watermark of 12 million barrels of oil a day in April to the expected low point in June of 7.5m b/d, Saudi Arabia would have cut production by ~4.5m b/d. That means the Saudi cut is similar in size to Iraqi total output." He says that, "Russia has reduced production from April to May already by ~2m b/d, and probably more is coming in June, implying Moscow has cut output by about half the total output of Iraq." Again, significant numbers to consider understanding the view of Moscow about the cheaters, according to Blas. The cheaters swear that they will comply and the Saudis and the Russians say they are open to having a meeting that some expect could lead to an end of the year production cut agreement. A deal, if completed, would send Brent crude back to $50.00 very quickly if not even higher.
Diesel demand with global flights being canceled is adding to global distillate supply. Diesel tried to recover with gas and oil on economic optimism but was derailed after the Trump administration moved to ban incoming flights from China. The Washington Post reported that, "The change, announced by the Department of Transportation and beginning June 16, is in response to China's refusal to allow U.S. carriers to resume service to China. The rule would impact operations of seven carriers, including Air China (OTC:AIRYY) and China Eastern Airlines (NYSE:CEA). The department noted in its rule filing that the ban could take effect sooner at President Trump's discretion. Still, the June 16 date does give the two sides some time to iron out their differences and avert a ban.
Diesel supplies are on the rise. The Energy Information Administration (EIA) showed a drawdown in US crude stocks by 2.1 million barrels, gasoline stocks building by 2.8 million barrels but a historic record breaking 9.9 million barrels increase in distillate fuel stocks. Reuters reported that crude oil imports decelerated last week to 6.2 million b/d last week from an exceptionally high 7.2 million b/d the week before and imports from Saudi Arabia continued to run at 1.6 million b/d, the same as the week before, and an unusually fast rate, as tankers loaded on the Arabian peninsula at the height of the volume war with Russia were discharged and their crude declared to U.S. customs.
US gasoline demand continued its comeback and will be a driving force in the US oil price recovery.
Speaking of Russia, Oil Price. Com reports that, "Some 20,000 tons of fuel and lubricants spilled into an Arctic river near the industrial city of Norilsk and it will take decades for the river, Amancaya, to recover, the Russian state fishing authorities said. The spill was the result of damage in a storage tank at a Norilsk Nickel facility near the river, the company said. The damage, which unsealed the hermetically sealed tank, itself followed a breakage in the supports of the tank that had “served their purpose with no fail for more than 30 years,” the metals giant also said. At the moment, the company is collecting the fuel from the river, but it has already spilled into another river as well, according to Rosprirodnadzor, the country’s federal environmental authority. Norilsk Nickel said it had collected some 100 tons of diesel fuel. "It can already be said now that it will take decades for the restoration of the ecological balance of the affected Norilo-Pyasinsky water system," said the head of the federal fishing agency, Rosribolov. Dmitry Klokov added that the event is nothing short of an ecological catastrophe.
