Oil Context Weekly (W35)
Crude jumps ~$4/bbl to hit fresh 2023 highs of nearly $89/bbl (Brent) on tighter spot markets, plunging inventories, and confirmation of steep Saudi export cuts in August
Every week, I summarize 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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Flat Prices raced $4/bbl higher this week to mark fresh year-to-date highs on broad-based inventory declines, wider calendar spreads, and confirmation of lower Saudi crude exports.
Calendar Spreads widened and prompt WTI spreads hit their highest level since last November, confirming the tightness seen in global balance estimates and falling commercial stocks.
Inventories data was bullish across the board this week with unanimous draws across the US, ARA Europe, and Singapore; US draws were driven by the third-largest crude inventory decline of 2023, while ARA European stocks fell below year-ago levels to test trailing seasonal lows.
Refined Products remain abnormally tight but eased off notably following the expiration of especially tight September contracts at the end of August; gasoline cracks, now below $20/bbl, are past their seasonal strength, while both distillate and fuel oil cracks remain very high and continue to highlight the scarcity of heavier crude and coker feedstock.
Positioning data confirmed that speculators were net buyers of crude contracts last week driven by a reduction in gross shorts; we’ll need to wait for next week’s release to better appreciate how large a role speculative buying played in the sharp rally over the second half of the week.