Oil Context Weekly (W51)
Crude prices continue to climb on the combination of fundamental precautionary buying on the back of Red Sea shipping disruption anxieties, amplified by the continued bounce-back in spec positioning
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This week, I joined BNN Bloomberg’s The Close to discuss the bizarre oil price trajectory of 2023, Angola’s announcement that it’s leaving OPEC, the Red Sea shipping crisis, and what will drive the barrel in 2024. Watch that full interview here.
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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 rose ~$2.50/bbl for Brent to settle around $79/bbl; prices were driven by spot and prompt market buying in the form of both speculative and, more importantly, real physical precautionary demand on Red Sea shipping anxieties.
Futures Curves re-strengthened notably, with Brent flipping from its deepening prompt contango back to notably backwardation; commensurately strengthening of Brent CFDs adds further optimism that market activity is being driven, at least partially, by physical precautionary buying linked to shipping anxieties and not just the same old spec positioning cycle.
Inventories were mixed given messy builds in the US—especially sizable if you look at only crude and crude-derived products—that were only partially offset by the continued plunge in ARA European stocks.
Refined Products eased back, failing to keep pace with rallying crude prices and, at least in the US, weighed down by increasingly comfortable inventories levels, especially in gasoline.
Investor Positioning data revealed that hedge funds and money managers were, unsurprisingly, big buyers of crude futures and options contracts to the tune of 93.8 MMbbl over the past week-through-Tuesday, the largest weekly net spec positioning gain since the end of March as we were climbing out of the Silicon Valley Bank (SVB) mini-crisis.
As Well As feared oil market impacts stemming from growing shipping disruptions in the Red Sea and what Angola’s breakup with OPEC says about the stability of the producer group alliance.