Oil Context Weekly (W46)
Crude carnage as oil prices drop $10/bbl in the worst weekly loss since early-August and the front of the WTI curve flipped into contango for the first time since 2020.
A quick note that next week will be a double header after going deep down the refined products rabbit hole this week: I’ll be publishing both the updated Global Oil Data Deck numbers and the first in a series on the wildly divergent refined products market.
I was honored to join Erik Townsend on the MacroVoices Podcast last week to discuss a huge range of crude market dynamics and finish off by fervently disagreeing on how the US Strategic Petroleum Reserve should function. It was a great [long] conversation and you can listen to the full conversation for free on YouTube, Spotify, and on the MacroVoices Website.
Become a paid subscriber today to view the full Oil Context Weekly report on this week’s price carnage and join me in my hunt for ever-deeper oil & gas market context.
In terms of this post, it was an exceptionally negative week for crude pricing so I’ve opted to put more time into the What Happened This Week section rather than my usual extra topics at the end—let’s just say there’s a lot of price commentary below.
Flat Prices could, charitably, be described as an absolute bloodbath, down about $10/bbl on the week at their peak this morning. At the time of writing, Brent is trading at $88/bbl and WTI at $80/bbl, each down $8-9/bbl in the worst weekly price performance since early August as overextended bullish positioning finally came crashing back down.
Calendar Spreads were flashing even more concern than the carnage in flat prices and the front of both the WTI and Brent curves collapsed; the front of the WTI curve flipped into contango for the first time since late-2020.
Inventories data was generally bullish this past week with the largest US total petroleum draw (-6.5 MMbbl) since the end of September being joined by another 1 MMbbl draw in Singapore and only slightly offset by a small 0.6 MMbbl build around ARA European ports.
Refined Products were definitely a sideshow to crude’s carnage this week after being center stage for a month; diesel cracks did rise $6/bbl from Monday to $68/bbl at the time of writing on more European refinery strikes but gasoline mostly chopped sideways with a crack that was up less than $1/bbl from Monday.
Positioning data revealed that hedge funds and other speculators were net sellers of crude contracts over the past week through Tuesday to the tune of 51.5 MMbbl, with long positions falling by 38.7 MMbbl and short positions rising by 12.8 MMbbl—and given the price pressure that came to a head today, it is very likely that we will see further fund selling in next week’s data. After reaching it’s highest level in over a year last week, the net managed money position fell back 1.3 percentage points w/w to 8.9%, the largest weekly proportionate pullback since late-June.