Oil Context Weekly (W23)
Crude prices fall coming out of OPEC before recovering over the balance of the week, but futures term structure, refined products, and spec positioning all show signs of having bottomed out.
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 fell more than $5/bbl coming out of OPEC weekend but then spent the week recovering as bearish interpretations were challenged by OPEC ministers; crude ended the week down ~$2/bbl.
Futures Curves presented the clearest sign of market strength, with prompt calendar spreads definitively reversing course after two months of weakening pressure; Brent CFDs, the best read of physical North Sea spot market developments, rocketed back into backwardation after spending much of the past month in outright contango.
Inventories data was bearishas all three major high-frequency hubs reported sizable builds; aggressive inflows of refined products drove a second more-than-10MMbbl build in the US in as many weeks.
Refined Products remain the weak spot in the petroleum complex but both crack spreads and term structure for gasoline and diesel contracts improved after a long stretch of worsening conditions.
Investor Positioning data revealed one of the single largest speculative crude selling weeks on record to bring net positions back to near December lows, which overwhelmingly tilts the balance of positioning risk—by which I mean the most likely next wave of incremental buying or selling pressure—unambiguously to the upside.
As Well As OPEC ministers push back on bearish post-meeting market reaction, thoughts on “push” vs “pull” OPEC cut easing, and the US Department of Energy boosts pace of SPR purchases by 50%.