Oil Context Weekly (W20)
Flat crude prices rise despite further weakening in Brent crude term structure as the gasoline market finds a near-term floor.
Every week, I summarize and analyze 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 gained a buck-and-change despite further weakening across the Brent crude futures curve, likely benefiting, in the latter half of the week, from the gasoline market recovery; WTI managed to close the week back above $80/bbl.
Futures Curves weakened as Brent prompt spreads resumed their narrowing trend and Brent CFDs fell into outright contango for the first time since early-February; WTI, meanwhile, stayed firm as spreads remained flat and bucked Brent’s weakening trend.
Inventories data was mixed between draws in Singapore and a build in ARA Europe as well as a bearish headline (total product build) but bullish detail (counterseasonal crude draw) report out of the US, with the US report roughly marking the low-point for flat crude prices this week.
Refined Products experienced an even more exciting week, with the gasoline market weakening further—both crack spreads and term structure—until finding a near-term bottom on Tuesday and recovering with flat crude prices from Wednesday forward; meanwhile, gasoline remained stronger than contango’d diesel, which puts a lot of eggs in the gasoline basket and heightens concerns driven by recent gasoline warning signs.
Positioning data confirmed that speculators were once again notable sellers of crude contracts, a fact that reads bullish given the relative resilience of prices of the survey window; the net speculative position is now at its lowest level since early January and hot money flow risks are tilted, slightly, to the upside.
As Well As interpreting the pre-OPEC+ meeting tea leaves, some thoughts on what the producer group’s capacity and baseline updating process could mean for production, and Western Canadian wildfire risks mount with out of control blaze immediately southwest of Fort McMurray.