Oil Context Weekly (W39)
Crude prices partially reversed their rally on a torrent of geopolitically bearish headlines—including a reported softening of Saudi price sensitivity
The bulk of today’s round-up will focus on the most consequential headline this week, via the Financial Times: “Saudi Arabia ready to abandon $100 crude target to take back market share”; free subscribers can check out my lengthy Twitter thread that parsed the news in real time.
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Summary
Flat Prices fell ~$2/bbl as a flurry of bearish headlines—most notably, a reported shift in Saudi price disposition—prompted selling and interrupted the ongoing rebalancing of overstretched speculative positioning.
Timespreads weakened notably in a far more concerning development than the rout in flat prices; Brent prompt spreads are back to the level when flat prices bottomed two and a half weeks ago, though DFLs are holding up slightly stronger.
Inventories data was mixed but leaned heavily bullish, with large draws in the US and Singaporean stocks swamping the small build in ARA Europe.
Refined Products were largely spared the beating received by crude contracts, with gasoline margins softening slightly and diesel continuing its recovery.
Positioning data revealed that speculative participants continued to rebuild oversold positions through Tuesday (when crude was positive on the week) but, on a net basis, remained lower than the troughs witnessed in May and December; while positioning isn't fate, the anticipated rebuilding of speculative net length is expected to maintain positive support for the barrel.
As Well As a Financial Times report suggests that Saudi Arabia is abandoning its “$100 target” (I have many thoughts), and mixed progress toward resolving the Libyan dispute.