Oil Context Weekly (W32)
Crude prices rebound to rise nearly $3/bbl following a rapid reversal of macro pressure, speculative selling, and term structure deterioration, with previous headwinds all turning to tailwinds
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 for the first time in five weeks, gaining nearly $3/bbl for Brent to finish the week just shy of the $80/bbl mark; unsurprisingly, the bottoming of the month-long selloff occurred alongside a pullback in broader risk asset sentiment and driven higher by the return of speculative flows that had earlier in the week fallen roughly the same acutely oversold levels as last June following the OPEC+ meeting.
Futures Curves improved even more notably than flat prices, with prompt calendar spreads rising back to the strongly backwardated levels of mid-July and Brent Dated-to-Frontline spreads jumped back into comfortable backwardation after dipping briefly into contango on Tuesday.
Inventories data was modestly but unanimously bearish this week, with small builds across the US, Singapore, and ARA Europe; crude stocks remain low and are drawing seasonally, while refined products stocks—especially of diesel—are rising notably and confirming ongoing end-product demand weakening.
Refined Products prices underperformed the turnaround in crude and further diesel weakening provided an unambiguous bearish spoiler for the more bullish tone to the week.
As Well As waiting on an Iranian retaliation against Israel, Libya’s largest oil field drops out of the market, Trump wants to refill the SPR even faster, and Enbridge is looking to expand capacity on the Mainline which will be welcome news for Canadian crude producers.