East of Suez - July 2024

Special topic: The Asian medium sour oil market has remained unimpressed despite reduced cargo availability, underscoring weak demand in Eastern Asia. This, along with increased domestic consumption in the Middle East, has largely contributed to the 1.6 Mbd decline in OPEC+ oil exports in June. Saudi oil exports have reached their lowest level in over a decade.

Upstream: OPEC+ production dipped to its lowest of the year in June as Saudi Arabia, Russia and Iraq all cut production, seeking to put an end to past months' overproduction and confronting tangibly lower Asian demand for term barrels. Meanwhile, China's upstream bonanza is running out of steam and India would need more investment to sustain the slight momentum it experienced in early 2024.

Flows: Middle Eastern crude flows fell to a 3-year low in June with most of the downside coming on the back of a decline in availability of medium-density grades, potentially setting the stage for tighter sweet-sour spreads in the months ahead as Middle Eastern crude burning rises further in July.

Differentials: Prices for Middle Eastern medium sour grades slackened in June due to underwhelmed demand and ample supplies. Meanwhile, the potential reopening of the West-East arbitrage window and lucrative Russian crude prices will continue to draw interest away from regional grades for Asian refiners. All these factors suggest another, and likely larger, cut in OSPs for August.