Oil Context Weekly (W47)
Crude prices rally to upper end of recent range on heightened renewed Russia-Ukraine escalation and a rapid re-strengthening of term structure as prompt spreads see backwardation double.
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Summary
Flat Prices jumped $4/bbl to bring Brent above $75/bbl to finish the week, reaching the upper end of their recent range on the back of both an upswing in geopolitical concerns in Ukraine as well as a broader firming of crude term structure.
Timespreads strengthened notably, with prompt futures spreads and Brent DFLs both doubling their backwardation on the week following a steady erosion over recent months.
Inventories data leaned bearish with builds across all major tracked hubs; gasoline led those inflows, stocks of which remain split between very low in the US and increasingly and unseasonably high across ARA Europe and Singapore.
Refined Products crack spreads rose modestly this week, with gasoline in particular seeing timespreads jump sharply higher amidst still exceptionally low US inventories.
Positioning data indicated that speculators were modest net purchasers of crude contracts, though net exposure remains relatively stable over the past few weeks—while there likely remains ample cash typically allocated to crude positions on the sidelines, the market appears unwilling to take those positions as high as we routinely saw over the 18 months ending this past summer.
As Well As Donald Trump planning to resurrect the Keystone XL pipeline, OPEC+ likely to meet virtually on December 1st and again delay scheduled output increase, Russia-Ukraine war escalation, and China is consolidating its position as the key source of Asian demand for TMX barrels.