Welcome to Oil Context Weekly, my less formal wrap-up of the market analysis, news flow, and data releases that matter.

Every week, I summarize the developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data and then provide a taste of the themes I’m thinking about or following closely—highlights now included in the free summary.

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Summary

Flat Prices spent most of the week between $94-96 per barrel before leaping higher on Friday to reach the highest level in a month, within pennies of the highest level since late-August on Chinese reopening optimism—Brent crude is sitting at just shy of $99/bbl, up roughly $3/bbl off last week’s close.

Calendar spreads weakened on a prompt basis, widening ~$0.20/bbl on the week, but strengthened on a Jun23/Dec23 basis.

Inventories fell at their fastest pace in two months in Singapore while rising slightly in Europe; a small US total commercial petroleum inventory draw shrouded the largest US commercial crude decline since August.

Refined Products eased off Monday’s exceptionally tight contract expiration but then both gasoline and diesel crack spreads proceeded to strengthen over the remainder of the week.

Positioning data revealed another week of speculative buying, with the net position rising 38.3 MMbbl on a 40.6 MMbbl long addition as well as a notable 2.3 MMbbl addition to short positions, which was the first week since August that both longs and shorts rose together on the week. More importantly, the net position as a share of open interest rose to 9.55%, its highest level since prices hit their summer peak in early June—and increasing the risks of a sharp pullback driven by capricious speculative holdings.

Russian price cap: the week yielded a flurry of new details regarding the application and enforcement of the G7’s proposed price cap on Russian seaborne crude; however, with only a month and a day to go before the sanctions kick in on the provision of shipping services (e.g., insurance), many details—for instance, what actually is the price?—remain unanswered.

Lucy and the “dynamic-zero” football: risk assets are benefitting from renewed optimism regarding China’s COVID-zero policy stance, with optimists pointing at everything from an unverified social media post to a former Chinese health official at a bank conference to looser travel restrictions; however, it’s clear that Chinese leadership remains steadfast in their commitment to the current policy trajectory, especially amidst China’s worst COVID outbreak in six months.

What Happened This Week