Oil Context Weekly (W50)
Crude rises for the first time in 8 weeks to finally add a faint dash of green to round out the sea of Christmas red heading into the holidays.
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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Flat Prices finished higher for the first time in 8 weeks, rising ~$1/bbl to around $77/bbl Brent on a combination of lower US inventories and sustained risk-on sentiment from the Fed’s dovish pivot.
Futures Curve weakened with near-dated spreads falling into deeper contango, albeit with a notable distinction between Brent’s prompt spread volatility and the slower but far steadier decline of WTI’s prompt spread.
Inventories data leaned bullish given the largest US commercial petroleum stock decline in 8 weeks, which, together with a modest pullback in ARA European stocks, easily overshadowed the admittedly sizable Singaporean inflows.
Refined Products also strengthened as both diesel and gasoline crack spreads gained roughly $2/bbl; gasoline, in particular, is benefitting from smaller than anticipated US stock builds as well as the plunging inventories across Singapore and ARA Europe.
Investor Positioning data revealed another week of aggressive speculative selling of crude contracts, which brought the net speculative position to by far its lowest since the early-2020 and within spitting distance of that low-water mark—while we have no doubt come off that bottom given the post-Wednesday rally, positioning remains overstretched bearish and normalization risk remains a tailwind for the barrel.
As Well As the Federal Reserve’s surprise dovish pivot, a potentially existential delay on Canada’s long-awaited TMX pipeline, and ships begin taking the far longer journey to avoid the Suez Canal and Houthi attacks around the Red Sea.