Oil Context Weekly (W52)
Crude finishes 2023 on a down note—and higher level thoughts on our current geopolitical risk environment.
Happy holiday inbetweener week, Commodity Context subscribers, and I hope you all have an incredible New Year—thank you so much for all the support over the past year and I’m tremendously excited for what we have brewing for 2024.
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 fell ~$2/bbl this week, and are down nearly $5/bbl from their Tuesday high amidst thin holiday trading, a bearish sentiment persists despite the acutely heightened geopolitical risk environment.
Futures Curve Weakened slightly, though the Brent curve remains fully backwardated; Brent CFDs, meanwhile, have flipped back into contango, unwinding the entirety of last week’s rally and indicating that any prior precautionary buying pressure has subsided.
Inventories data were mixed but leaned bullish at a headline level thanks to large stateside draws;however, year-end tax avoidance strategies lessen the signal strength of end-year draws or early New Year builds, so it will be a few weeks before we start really reading into US weekly stocks data again.
Refined Products eased slightly, with diesel in particular continuing to feel downside pressure that briefly brought diesel cracks spreads in New York Harbor below $30/bbl for the first time since mid-July.
Investor Positioning data revealed that speculators were net buyers of crude contracts to the tune of 59.9 MMbbl over the past week-though-Tuesday, however given that Tuesday represented the weekly high-water mark we’ve likely pulled back again this week.
As Well As how I think about geopolitical risk in chaotic moments like that in which we find ourselves today.