Oil Context Weekly (W18)
Crude prices collapse ~$7/bbl for the worst performing week in seven months as speculative-driven selling pressure battered the barrel
Every week, I summarize developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely.
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Summary
Flat Prices cratered nearly $7/bbl for the worst weekly performance since the beginning of last October as the speculative positioning that fueled the March-April rally began deflating in rapid fashion.
Futures Curves weakened notably, adding fundamental confirmation of the selloff in flat prices, as key front-of-curve calendar spreads nearly halved over the past week.
Inventories data were mixed with a large build in the US and sizable draw in ARA Europe; while a big deal was made by many about the US crude-driven build, it, at most, reversed the prior week’s counter-seasonally bullish crude draw.
Refined Products markets continue to focus on diesel weakness, though crack spreads for the middle distillate recovered slightly (and gasoline cracks pulled back); the most bullish move in refined products, however, was found in US Gulf Coast fuel oil, margins for which are ripping higher as heavy crude supplies to the region are cut.
Investor Positioning data surprised by revealing speculators to have returned to buying over the past week-through-Tuesday, though those positions have almost certainly declined through the selling over the second half of the week; still, this likely means an even larger than previously appreciated pool of remaining flighty positions at risk of being sold.
As Well As increasing speculation that OPEC+ will extend its cuts into the latter half of 2024 when the group meets next month, implications of continued UAE production capacity growth, OPEC+ negotiates a quota overproduction compensation plan with Iraq and Kazakhstan, and the FTC’s accusations of a shale patch CEO attempting to collude with OPEC+.