Oil Context Weekly (W44)
Crude prices collapsed following narrower than feared Israeli strikes on Iran but began to recover on renewed saber-rattling from Tehran; US election may bring changes to oil sanction policy
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Summary
Flat Prices fell back sharply on Monday as market participants shed upside hedges following Israel’s more focused counterattack against Iran avoided nuclear and oil facilities, though contracts recovered over the course of the week before again trimming gains on Friday, ending ~$3/bbl lower w/w.
Timespreads were flatish, more or less following flat pricing over the course of the week, with both Brent and WTI futures curves remaining steadily backwardated.
Inventories data was universally bullish given large draws, most of which were more rapid than the seasonal norm, across each of the US, ARA Europe, and Singapore.
Refined Products were largely split between surging diesel crack spreads—driven by falling inventories and weak inbound European distillates shipments—and seasonally weaker gasoline margins.
Positioning data confirmed that speculators were once again net sellers of crude futures and options over the past week through Tuesday—hardly surprising given the pullback in flat prices, but we’re now once again squarely oversold and primed for a bounce.
As Well As Israel’s strikes on Iran fail to live up to hedged risk premium but set the stage for further escalation, Iran now planning yet another counterattack against Israel, does the US presidential election matter for the oil market?, and latest Brazilian production data continues string of disappointing results and raises questions about sustainability of go-forward non-OPEC supply growth assumptions.