Balance: Slight Deficit Moves Toward Surplus of Crude

Supply and demand balances signal that a slight supply deficit in the fourth quarter is flipping into a surplus in the first half of 2023. Softening demand in the fourth quarter and rising supply helped narrow the deficit from an initial 1.1 million barrels per day to 400,000 b/d — and it might tighten further if US supply continues to be revised upward. The market is well supplied crude, but price support is maintained from the product side of the equation. US diesel cracks at $60 per barrel continue to signal a very tight diesel market even though price spikes have been averted by warm winter weather in the northern Hemisphere, ongoing high Russian product exports ahead of the European Union’s Feb. 5 import ban, and rising product exports from China.