Alaska North Slope crude slid $4.15 June 22 to close at $112.61 per barrel, while West Texas Intermediate tanked $4.46 to close at $106.19 and Brent fell $2.91 to close at $111.74.
The red ink came as traders fretted about the possibility that the United States would fall into a recession in the wake of signals from the U.S. Federal Reserve that it would be willing to accept job losses in its fight against inflation.
The pessimism spilled over into U.S. equity markets, which fell, erasing a part of the strong gains set in a rally June 21 that followed the federal Juneteenth holiday Monday June 20.
Oil rallied modestly June 21 as well. ANS rose 59 cents to close at $116.76, WTI rose $1.09 to close at $110.65 and Brent rose $1.53 to close at $114.65. There was no trading in U.S. markets June 20.
Leading into the holiday weekend, the indexes closed substantially lower. ANS plunged $6.89 June 17 to close at $116.17, WTI plummeted $8.03 to close at $109.56 and Brent plunged $6.69 to close at $113.12.
On June 16, ANS managed a gain of $1.15 to close at $123.06, WTI gained $2.28 to close at $117.59 and Brent gained $1.30 to close at $118.51.
From Wednesday to Wednesday, the ANS close June 22 was $9.30 lower than its closing price of $121.91 set June 15.
There is some evidence that U.S. drivers are cutting back on fuel purchases in light of regular gasoline prices hovering in the $5 per gallon range.
The Wall Street Journal reported June 22 that in the first full week of June, sales at U.S. gas stations were 8.2% lower than prices the same week in 2021 - the 14th consecutive week that sales have lagged 2021 levels, according to surveys by energy-data provider OPIS.
Drivers are consolidating trips or filling their tanks with only as much fuel as they need for a few days, the Journal report said, adding that analysts have said some drivers are carpooling or using mass transit and others are working from the office fewer days each week.
“You have to have some demand destruction to give supply a chance to catch up,” said Tom Kloza, OPIS global head of energy analysis.
Over the four weeks leading into June 10, motor gasoline product supplied to U.S. markets averaged 9.0 million barrels a day, down by 1.1% from the same period last year, the U.S. Energy Information Administration said June 15.
U.S. commercial crude oil inventories rose by 5.607 million barrels for the week ending June 17 according to the American Petroleum Institute, Oilprice.com reported June 22. Analysts had predicted a draw of 1.433 million barrels.
It was the first build exceeding 5 million barrels since mid-February, according to API data.
The Department of Energy released 6.8 million barrels from the Strategic Petroleum Reserve over the same period.
Russian oil diverts to AsiaSince the war between Russia and Ukraine began, imports of Russian oil to Asia have risen 347% above 2021 levels, based on the average of March to May 2022, according to Rystad Energy research.
Indian imports of Urals crude for the period are up by 658% compared to 2021 levels, while for China the increase is 205%, Rystad said in a June 20 release.
“India has emerged as the significant Urals importer in the region, prompted by the crude’s attractive margin in relation to Middle Eastern grades, which have traditionally been the country’s staple,” Rystad said.
The Urals sport a similar profile to Middle Eastern oil grades and an advantageous lower sulfur content, leading Indian refiners to swap Middle Eastern crudes in favor of Urals, Rystad said, adding that “as long as the Urals discount is maintained, it will have a huge margin advantage over alternative crude grades, meaning Indian refiners are likely to maximize Urals imports.”
European refiners started shunning Russian oil in late February, leading Russian imports to Europe to fall by 554,000 barrels per day - from 2.04 million bpd to 1.49 million bpd between March and May, the consultancy said. Russian oil imports by Asian refiners saw a corresponding 503,000 bpd increase from the January-February 2022 average of 1.14 million bpd to a March-May average of 1.517 million bpd.
The cost of financing the vessels and trades has increased significantly due to Western sanctions, but the discount on Urals is too attractive for some refiners to ignore, Rystad said.
“As with Iranian oil in the past, once Russian crude is refined, it will become almost impossible to distinguish between those barrels and others as they re-enter the international market,” it said.
“Historically, India has taken very little Russian oil but the war in Ukraine and Russian-origin oil embargoes by the EU have led to a rebalancing in oil trade flows,” said Wei Cheong Ho, Rystad vice president, downstream.
Discounts of Russian oil have to remain high to provide a compelling refining margin on top of offsetting the high insurance and freight costs, he said.
“Tracking what happens to Russian crude will be a challenge - Europe may end up importing petrol, diesel and other products from India that are blended with Russian Urals,” he said.
Rystad said it has seen low amounts - about 200,000 bpd - of Russian crude flow to Africa in June.