Oil [and OPEC] Context Weekly (W48)
All about OPEC+: producer group agreed to additional production cuts effective Jan '24, but negotiations were chaotic, commitments muddied, and prices fell sharply following the meeting’s conclusion.
Heads up that the vast majority of this week’s [longer-than-usual] write-up explores my reaction to yesterday’s chaotic OPEC+ meeting proceedings and the resultant market selloff.
Happy Friday!
Every week, I summarize developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely.
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Summary
Flat Prices ended the week nearly $2/bbl lower as Brent crude settled below $80/bbl after falling roughly $6/bbl from pre-OPEC+ meeting highs on immediate disappointment and lingering negative sentiment into Friday’s session.
Futures Curve flattened slightly after backwardation—that had been building steadily ahead of the OPEC+ meeting—rapidly reversed following the announcement of OPEC+’s eventual cut.
Inventories data was mixed with a sizable ~2 MMbbl draw in Singapore, a small 0.1 MMbbl draw in ARA Europe, and another 2.9 MMbbl build in the US; those Stateside builds were driven by large inflows of crude and crude-derived products and marked the 6th consecutive weekly crude build for a total of nearly 30 MMbbl.
Refined Products should, theoretically, feel the greatest heat from OPEC+ cuts that, by design, react to underwhelming [relative] end-user demand and artificially tighter refinery feedstock supplies; both diesel and gasoline cracks sold off following the conclusion of the meeting but, while diesel remains lower, gasoline managed to recover back to flat.
Investor Positioning data revealed that speculators were small net buyers (5.2 MMbbl) on a combination of both fresh longs and fresh shorts; while slightly off the bottom of last week, price action following the OPEC+ meeting all but guarantees that we should expect fresh net spec positioning lows in next week’s report, which tilts positioning risk overwhelmingly to the upside.
As Well As parsing the chaotic, ultimately disappointing OPEC+ meetings—different ways to count the cut, baseline revision politics, and the addition of Brazil as a new OPEC+ member (sort of?).