Oil Context Weekly (W13)
Crude prices rallied about $5/bbl this week, propelled by the loss of ~450 kbpd of Kurdish crude exports & assisted by substantial short-covering in WTI from previous overstretched levels
I joined BNN Bloomberg to discuss the upcoming inclusion of WTI Midland in the Brent price assessment basket—check out that full interview here and I’ve included my more detailed, reasonably lengthy notes for that interview in the Other Thoughts section below.
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.
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Flat Prices rose $5/bbl as paper market participants came off the depths of their mid-March banking crisis selloff shorts, assisted in that bounceback by the loss of ~450 kbpd of Iraqi Kurdish crude exports.
Calendar Spreads strengthened modestly over the past week, though overall the improvement was far less impressive than what we saw in flat price gains and provided little in the way of interesting signal.
Inventories data leaned bullish this past week on the back of a large 10.7 MMbbl draw in the US, a 1.7 MMbbl draw in Singapore, and a very mild stock build of 0.1 MMbbl in ARA Europe; US crude stocks saw their largest crude oil draw (-7.5 MMbbl) since last November.
Refined Products saw a swap in New York Harbor, with gasoline crack spreads in New York Harbor—up very slightly on the week at around $33/bbl vs Brent—have pushed above diesel cracks for the first time since May 2022.
Positioning data confirmed large speculators were net-buyers to the tune of 33.2 MMbbl, coming off the bottom of the lowest net positioning level since the initial COVID panic in early 2020 thanks entirely to substantial short-covering in WTI contracts; while directionally expected, the increase in net-length was smaller than expected, still leaving substantial dry spec powder on the sidelines to fuel the next crude rally higher.
Kurdish Crude Stoppage took ~450 kbpd in crude exports offline from the Turkish port of Ceyhan following a ruling by the International Chamber of Commerce’s (ICC) International Court of Arbitration in favour of Baghdad in its long-running dispute with Turkey, adding a nice fundamental storyline to the past week’s crude price gains.
Brent Cha-Cha-Cha-Changin’ to include WTI Midland, the first non-North Sea crude to be incorporated into the Brent basket, effective the June delivery contract which will begin trading in May; this change will dramatically increase the physical liquidity underpinning the Brent benchmark, but will also likely see WTI Midland become the dominant grade in the basket as current US exports to Europe are more than double the 700 kbpd of the combined current five crude grades (Brent, Fortiess, Oseberg, Ekofisk, and Troll)