- Oil is set to finish the week higher but could end the quarter down, marking its first quarterly loss in two years
- Increased recessionary fears, a generally weaker macroeconomic outlook, and strength in the U.S. dollar put downward pressure on oil this week
- The U.S. Dollar has eased from its recent 20-year highs
- A weaker USD makes dollar-denominated oil cheaper for buyers holding other currencies, improving demand for crude
- OPEC+ is set to meet next week, and it was reported that some major OPEC+ producers have already initiated discussions on a potential cut in their quota
- This morning, Reuters reported that some producers have narrowed the range of options for an output cut to between 0.5 to 1.0 MMBbl/d
- AEGIS notes that even if the quota target is reduced, the actual production loss may be much smaller, given that many OPEC+ countries are already pumping well below their targets
- Additionally, a significant fall in the collective quota would indicate to the market that the cartel is actively monitoring price changes and would act accordingly
- China officially announced a 15 million ton (3.063 MMBbl/d) fuel export quota, their largest export quota this year, after several weeks of discussions (BBG)
- China's fuel export quota will be set at 37.25 million tons (7.106 MMBbl/d) in 2022, which is slightly under the 37.61 million tons (7.680 MMBbl/d) announced last year
- The increased quota comes as China seeks to strengthen its economy, which has been hit by Covid lockdowns and a housing slump
- The U.S. Treasury Department imposed sanctions on several energy companies in China and the UAE as they violated the restrictions on Iranian exports (BBG)
- The sanctions were targeted at companies involved in the export of Iranian petroleum and petrochemical products worth "hundreds of millions of dollars" to consumers in South and East Asia, according to the Treasury Department
- The State Department said that sanctions against Iran would continue to "accelerate" if Tehran expands its nuclear program and continues to violate the JCPOA despite the ongoing impasse in US-Iran nuclear talks