Oil Context Weekly (W31)
Crude prices maintained their upward trajectory as the barrel marked its 6th consecutive weekly gain, bolstered by renewed extensions of voluntary production cuts and threats of additional reductions.
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 rose a buck and change for their sixth consecutive weekly gain, rebounding from a mid-week rout on the back of renewed extensions of both Saudi and Russian production cuts as well as the threat of “deeper” supply restraint to come if prices don’t cooperate.
Calendar Spreads mostly tracked the current of flat price movements down and back up with prompt spreads mostly flat on the week and Dec23/Dec24 spreads widening just modestly.
Inventories data was mixed across major tracked hubs but leaned heavily bullish thanks to the largest weekly US crude stock decline on record: a monumental 17 MMbbl draw.
Refined Products a decoupling whereby diesel climbed modestly and gasoline crack spreads fell by nearly $10/bbl; we’re now past the seasonal high water mark for US gasoline demand and current gasoline weakness likely reflects additional supplies coming on the back of refineries shifting their slates from pricier medium-sour crudes to comparatively cheaper light-sweet blends, which naturally yield more gasoline.
Positioning data revealed that speculators were net-buyers of crude contracts to the tune of 32.6 MMbbl, driven by equal parts fresh longs and short-covering; as a share of overall open interest, the net spec position has risen to 8.4%, in the upper end of the recent distribution and tilting positioning risk to the downside.
Other Themes this week include the latest on OPEC+ production and member cut extensions; some long-awaited progress on Canada’s TMX pipeline timetable; the alarming tail risk prospect of pre-war fuel stockpiling in China; and an announcement that the Biden Admin rescinded its most recent offer to purchase 6 MMbbl of crude to refill the SPR.