Oil Context Weekly (W33)
Oil Context Weekly (W33)
Crude marks the end of its 7 week-long rally on the back of broadly weaker risk sentiment and a litany of ever-worsening China-related headlines
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Summary
Flat Prices marked an end to their seven week-long rally with contracts declining by ~$2/bbl on a litany of worsening news out of China, the most likely culprit for the soured sentiment that had an outsized impact given reduced liquidity in major crude contracts.
Calendar Spreads narrowed alongside falling flat prices; prompt spreads have completely reversed the promising rally of the past couple weeks, sending a strong signal that the crude pullback had at least some legs in fundamental reality.
Inventories data was mixed but leaned bullish, with a large draw in the US more than offsetting a smaller draw in ARA Europe and roughly flat Singaporean stocks; while the US draw managed to reverse last week’s narrative-violating build, we’re going to need to see many more draws over the coming weeks and months for the second-half deficits to be believed by the market.
Refined Products strength was concentrated in diesel, which saw crack spreads rise back to almost hitting $50/bbl and marking a fresh high since January; gasoline, meanwhile, chopped lower but remains elevated.
Positioning data confirmed that speculators were net sellers of crude to the tune of 11.6 MMbbl through the week ending Tuesday, with the selling concentrated in WTI contracts as investors at least momentarily reconsidered the ongoing rotation into WTI and away from Brent; as a share of total open interest, the net spec position now stands at 8.1%, down ~25 bps w/w but still at the upper end of the recent range and thus maintaining positioning risks to the downside.