Oil Context Weekly (W39)
Crude continues to drive higher and the futures curve is getting even steeper, while gasoline refining margins are imploding
Programming note: my wife and I are extremely excited to welcome our third son, born healthy and happy earlier this week, to the family business. Rest assured that I will have a full note contextualizing Russia’s diesel export ban out shortly and be diving headlong into some exciting thematics over the coming weeks.
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.
Become a paid subscriber today to get the full Oil Context Weekly report every Friday and join me in my hunt for ever-deeper oil & gas market context.
If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.
Flat Prices continued to rise, reaching a high of nearly $98/bbl before modestly pulling back to around $95/bbl; prices have risen quickly, assisted by heavy speculative inflows that inevitably lead to periods of consolidation and profit-taking like we’re seeing today.
Calendar Spreads blew out into even steeper backwardation, with both Brent and WTI prompt spreads sitting around $2/bbl; this indicates a tightening of spot market conditions and the attracting of additional capital inflows with the attractiveness of that backwardated roll yield.
Inventories data leaned bullish with declines in Singapore and the US that were only partially offset by a small build in ARA Europe; US crude inventories continue to draw and rapidly approach seasonal lows, while gasoline inventories are recovering back toward the seasonal norm.
Refined Products are communicating extremely different product-level conditions, with diesel crack spreads remaining at exceptionally strained levels while gasoline cracks fell to their lowest level since the initial COVID demand collapse.
Positioning data revealed that speculators were small net sellers this week-through-Tuesday given fresh shorting, but the net spec position as a share of total open interest is at its highest level since July 2021 and positioning risk remains to the downside given the possibility of profit taking, even with the added draw of a steeply attractive roll yield.