Crude Oil and Refining: Quarter two performance

April began with Brent crude oil nearing a six-month high of US$89/bbl, having risen consistently through the first quarter of the year.  Prices were pushed by deepening geopolitical tensions in the Middle East, culminating in a missile attack form Iran targeting Israeli territory.  Brent climbed above US$90/bbl for the first time since October 2023 following the unprecedented attack.  Prices had already been supported by Ukrainian attacks on oil facilities inside Russia, leading to concerns over supply as Russia banned some oil product exports.  Brent prices averaged US$90/bbl for April, up six percent from March. 

Crude prices softened from late April and continued a downwards trend into early June.  Negative pressure came from weaker demand growth signals in both China and OECD markets, coupled with increasing U.S. oil output and rising inventories.  With prices dipping below US$80/bbl in May, OPEC+ members agreed to extend supply cuts talked at 3.66 million b/d until the end of 2025.  However, a schedule for relaxing an additional 2.2 million b/d of voluntary cuts was agreed, softening the impact on market sentiment.  Crude prices firmed through June, settling above US$85/bbl by the end of the month.  Cost of petrochemical feedstocks sourced from the refinery followed the pattern of crude oil prices, with naphtha prices rising to a seven-month high in April before dropping back through May. 

Demand for crude oil slowed through the opening quarter of 2024, with consumption of gasoil and fuel oil most vulnerable.  Weak demand in the first quarter was driven by constraints in major consumption centres and continued high interest rates, low US refinery utilisation and stubborn demand weakness in China. Chinese crude imports slowed (albeit up year-on-year, from a base interrupted by the zero COVID-19 policy).  IEA revised its yearly consumption forecast downwards in February, with anticipated growth of 1.22 mmb/d, around half that of 2023. 

Q2 continued along similar lines, with product markets softening further with gasoil consumption particularly weak amid economic uncertainty.  China remained a drag on consumption, with Chinese refineries reducing run rates in April and May.  Operating rates in May were down almost two percent on the previous year, dented by pressure on margins and by planned maintenance.  Crude stocks increased one mmb/d in May, despite cutting imports.  Weak demand in China compounded softer diesel consumption in OECD markets, prompting the IEA to further trim expectations for 2024 demand. 

Weaker oil product markets through April and May depressed refinery profitability towards a thirty-month low.  June saw a recovery in crude prices, with Brent rebounding from US$77/bl early in the month to over US$85/bl towards the end of the month.  The recovery was largely driven by increased refinery runs and lower inventories in the U.S. buoyed by an OPEC+ clarification that the relaxation of its 2.2 mmb/d voluntary supply cuts announced earlier would be dependent on market conditions. 

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Quarterly Business Analysis: Petrochemicals, Polymers and C1 Chemicals - Q2 2024

The Quarterly Business Analysis provides key insight into production economics for a broad range of commodity petrochemicals, polymers and C1 chemicals.  The analysis presents a review of costs, prices and margins for typical production assets, providing a valuable view of regional and value chain competitiveness and is is available for each key price setting region - Asia Pacific, Middle East, Western Europe and the United States.  A quarterly report provides insightful commentary to illustrate current trends, related to recent market developments.  The accompanying database is updated monthly.

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