Oil Market Outlook

Crude Oil Price Outlook : Crude price move around 95-120 $/BBL in Q2’22 on worries that sliding output in sanctions-hit Russia, the world’s second-biggest oil exporter, will tighten supply. The release of Strategic Petroleum Reserve volumes equals 1.3 MBD over the next six month, enough to offset a shortfall of 1 MBD of Russian oil supply. But geopolitical supply risks led by Libya and Iran and growing loss of Russian supply could bring back supply shortfall again

Focus on Q2’22:

• Supply could be squeezed further if the EU imposes an embargo on Russian oil.
• OPEC+ stick to existing agreement with 432,000 BPD rise in May
• Libya supply loss due to disruptions from protests
• IMF cuts global GDP growth forecast for 2022 from 4.4% to 3.6% from Russia’s war in Ukraine and warns of further cuts if western countries expand their sanctions against Russia.
• Concerns on China lockdown hit oil demand
• IEA members to release 1.3 MMBD oil over 6 months
• Two-month truce in Yemen would reduce oil supply threat

Market Highlights in 2022:

• Oil demand recovering more slowly: higher recession risk
• Lower supply due to sanctions on Russian oil
• Supply uncertainty from Libya outages and prolong Iranian sanctions lifting.
• Geopolitical supply risks in MENA
• OPEC+ production quota policy
• China stimulus hopes after economic hit by COVID-19
• Supply increase as U.S. and Iran nuclear talks.
• Low global oil products inventory, refineries will need to run harder
• Strong dollar index on potential US interest rate rise

Stronger gasoil crack as supply tightness from Russia-Ukraine tensions amid improving demand as recovering economic activities. Stronger gasoline crack as recovering demand across the region after eased restrictions with the tightness in the West in the lead-up to the summer driving season. Higher low sulfur fuel oil crack as lower supply shift away from marine fuel production towards the more profitable gasoil pool and reduced arbitrage cargo from Middle-East

Focus on Q2’22:

• Gasoil crack will be continued strong amid supply uncertainties with concerns over supply as Russia-Ukraine tensions and against the backdrop of extremely low global inventory levels as well as continued demand recovery from the reopening of economies
• Gasoline crack will be supported as the strength demand recovery after more countries eased restrictions and further border reopening amid the refinery maintenance in Asia
• Low Sulfur Fuel oil crack will be supported as higher gasoil cracks are incentivizing refiners to move sulfur cutter supply away from marine fuel production. US refiners pay up for cargoes from the Middle East at levels Asian refiners weren’t willing to pay

Market Highlights in 2022:

• The continued demand recovery to pre-COVID levels as relax restrictions and further border reopening due to the lower severity of COVID-19 variant amid widespread and booster vaccination
• Expected growth in manufacturing and industrial demand will recover after Covid-19
• The resumption of air travel after more countries gradual lifting of travel restrictions
• The Low Sulfur Fuel Oil’s supply in the worldwide will be continued to fall on the back of continued refinery modernization and will be supported by lower supply due to refiners move sulfur cutter supply away from marine fuel