Oil Context Weekly (W26)
Crude prices rise another dollar and futures curves grow more backwardated as prompt market signals tighten, though gains have been helped by a rapid inflow of returning speculative capital.
Had the opportunity to join Petroleum Economist Editor-in-Chief Paul Hickin on the Energy Oracles podcast, which you can listen to for free here (~36 minutes) or on the Petroleum Economist website.
I also joined Jeremy Szafron about the outlook for balances and some potential election impacts with Kitco News, which you can watch on Youtube here (~19 minutes).
Finally, in case you missed it, I encourage you to check out my full public report examining the structure and ongoing value of Canada’s oil refining sector published by the Macdonald-Laurier Institute, which you can read here.
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 rose a buck and change for Brent crude to end the week, and the contract month, above $86/bbl, or the strongest weekly close since April.
Futures Curves strengthened and further confirmed the ongoing rally in flat prices as Brent prompt calendar spreads reached their steepest backwardation since April and WTI spreads are sitting around their widest level of the year.
Inventories data was mixed but leaned bearish thanks to unexpectedly large builds of key US stocks like crude and gasoline, which continue to rise despite a typical seasonal shift toward draws.
Refined Products reversed weekly gains, ending more or less flat after both gasoline and diesel crack spreads rose ~$2/bbl through Thursday afternoon.
Investor Positioning data revealed that speculators were large buyers of crude contracts for the third week in a row, rapidly shifting us from acutely overstretched to the downside in early June to mildly overbid today vs. recent history; while spec flows have a tendency to maintain momentum and overshoot, further gains from here steadily increase the probability of a volatile pullback when those participants inevitably take profits.
As Well As oil market implications of president Biden’s disastrous debate performance, the US Supreme Court kneecaps the power of federal regulatory agencies, US crude production continues to recover, and the rising risk of escalation at the Israel-Lebanon border once again threatens wider regional conflict.