Oil Context Weekly (W10)
Wild week for markets brings crude ~$3.50/bbl lower on a combination of rates expectations volatility as well as an abrupt bank stock selloff and broader market concerns
Happy Friday, all!
Every week, I summarize the developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data and then provide a taste of the themes I’m thinking about or following closely.
Heads up that this edition of Oil Context Weekly is a whopper at more than 2,000 words because, oh boy, what a week.
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The results of last week’s poll were once again mildly bullish with 44% of you anticipating weekly crude price gains of $1-5/bbl—needless to say, that was a bit of a miss this past week.
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(Brent crude = white; DXY US dollar index, inverted = blue; SP500 futures = orange; source: Bloomberg Terminal)
Flat Price fell early in the week on hawkish comments from Fed Chair Powell and took another leg lower on Thursday amidst a bank stock selloff; crude recovered from Thursday losses, but a post-bank-carnage easing of interest rate hike expectations sent the US dollar all the way back to Monday levels and left crude still lingering ~$3.50/bbl down on the week
Calendar Spreads followed the trajectory of flat prices, narrowing on Tuesday and again on Thursday before widening anew on Friday, but weren’t especially remarkable in the scheme of the week; prompt spreads ended the week slightly higher, Jun/Dec spreads slightly lower.
Inventories data was mixed this past week as a net-build in total liquids—builds in the US and ARA Europe, small draw in Singapore—came alongside the first weekly decline in US crude stockpiles this year.
Refined Products crack spreads for both diesel and gasoline fell back this week by ~$2/bbl each, but—like calendar spreads—were generally less eventful than the drama driving headline crude and product prices over the past five days.
Positioning data revealed that hedge funds and other money managers were net buyers of Brent contracts to the tune of 12.3 MMbbl last week-through-Tuesday; most concerningly, the net spec position as a share of total open interest in Brent contracts now sits at a fresh pandemic-era high of 11.1%, its highest since January 2020, which increases the risk of sharp, capricious selloffs.
Rivals Make Nice: Saudi Arabia and Iran announced that the two rival OPEC members would be resuming official diplomatic relations for the first time since Riyadh cut ties with Tehran in 2016 following the Saudi embassy being stormed in Tehran
EIA Data Disaster: The US Energy Information Administration (EIA), which publishes key domestic and international oil market data, began an unstable and muddled data process changeover that has presented challenges for data analysts (yours truly included) as well as the EIA’s own publishing and data reporting capacities.