On April 18, ANZ said last week’s strong employment and inflation data had killed hopes that the Fed would pause its rate hike cycle.
Investor interest then waned as U.S. Treasury yields moved higher and the dollar strengthened. Weak demand in Asia further dampened market sentiment.
Refiners in the region are considering production cuts as profit margins have fallen sharply. Crack spreads for diesel and jet fuel also fell sharply.
However, losses in oil prices were limited as investors remained focused on supply-side issues.
OPEC’s decision to cut production by more than 1 million bpd will not take effect until next month. We expect production cuts to increase the gap between supply and demand in the market to 2 million barrels per day in 2023.