Oil Context Weekly (W21)
Crude prices finally showed some independence following Saudi “ouching” comment only to fall back into the macro vortex to end the week; meanwhile, Brent and WTI both slumped back into prompt contango
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 finally did their own thing, slipping the macro collar briefly to trade $3/bbl higher through Wednesday off of renewed “ouching” comments from the Saudi Energy Minister and then collapsing, still on its own merits, back to flat on the week before once again rising alongside equities and the macro vortex.
Calendar Spreads added important texture to the flat price rollercoaster, with spec-driven Dec/Dec spreads leading us on the rally through Wednesday only for the pullback to be driven by more fundamentally proximate prompt spreads, which, for both Brent and WTI, collapsed back into contango—in Brent’s case, for the first real time since January.
Inventories data was overwhelmingly bullish, revealing the largest week of ubiquitous commercial draws across all major tracked hubs of the year; US crude inventories saw their largest draw since last November, and US inventories of key refined products continue to look ever-more precarious.
Refined Product strength continues to be concentrated in consumer fuels like gasoline, which saw crack spreads rise to their highest level since last July and—if they keep rising—risks lifting fuel prices back into the center of the political discussion as we kick off driving season.
Positioning data revealed that speculators were net buyers of crude futures and options contracts in the week-through-Tuesday to the tune of 13 MMbbl, which modestly increased the net spec position as a share of total open interest to 5.4%; positioning risk remains heavily tilted to the upside, especially if it remains net low and with large gross short positions heading into next weekend’s OPEC+ meeting.