Commodity Context

Commodity Context

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Commodity Context
Commodity Context
Oil Context Weekly (W25)

Oil Context Weekly (W25)

Crude fell ~$3/bbl and Brent reentered prompt contango despite the reasonably quiet week, pressured lower by the latest iteration of central bank hikes and hawkish central banker comments.

Rory Johnston's avatar
Rory Johnston
Jun 23, 2023
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Commodity Context
Commodity Context
Oil Context Weekly (W25)
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Happy Friday,

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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Summary

Flat prices fell ~$3/bbl alongside copper contracts and a rallying US dollar following a larger-than-expected hike by the Bank of England amidst stubbornly sticky inflationary pressures—these losses erased last week’s Chinese stimulus-driven gains and then some.

Calendar Spreads weakened and pushed the front of the Brent curve into the steepest prompt contango (excluding expiry dynamics) since the beginning of the year; meanwhile, the slower-moving 2nd-3rd month spreads for both Brent and WTI have continued their steady declines that followed short-lived highs triggered by the surprise OPEC+ cuts in early April.

Inventories data leaned bullish overall despite less constructive US developments; a modest crude draw and a total petroleum build in the US was balanced with the largest Singaporean refined product draw since April 2022.

Refined Products crack spreads slipped, with both gasoline and diesel cracks falling by ~$3/bbl in New York Harbor; beyond the weekly chop, strength in the refined barrel appears concentrated in gasoline, diesel, and, increasingly, high sulphur fuel oil, while petrochemical linked fuels like naphtha and LPG are, once again, falling away.

Positioning data revealed that speculators were buyers of crude contracts to the tune of 18.7 MMbbl in the week-through-Tuesday, lifting the net spec position as a share of total open interest to 5.8%; the stubborn persistence of gross short positioning has become a price-depressive feature of this latest cycle.

What Happened This Week

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