Oil Context Weekly (W5)
A very ugly week for crude knocks prices back by $7/bbl despite no major oil-related news, the most since New Year rout, with both calendar and crack spreads joining the washout.
Every week, I summarize the developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data and then provide a taste of the themes I’m thinking about or following closely.
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Flat Prices fell ~$7/bbl through the week to end just below $80/bbl (Brent basis); inventory data wasn’t especially supportive, but, beyond that, this rout doesn’t seem to reflect any specific fundamental headlines.
Calendar Spreads mirrored the pain felt for flat prices with both prompt and Jun23/Dec23 calendar spreads narrowing notably through the week; prompt spreads, and with them the entire Brent curve, remain in backwardation, but the curve has weakened substantially over the past couple weeks.
Inventories data leaned bearish this past week with builds across all major regions; commercial petroleum stocks rose 1.6 MMbbl in the US, 2.8 MMbbl in Singapore (the largest build since mid-September), and 0.2 MMbbl in ARA Europe.
Refined Products fell further and faster than crude, with crack spreads in New York Harbor falling by ~$13 (-27%) and ~$4 (-18%), respectively, over the past 5 days. Diesel crack spreads are now sitting at their lowest level since early August and just pennies away from their lowest level since April 2022.
Positioning data was not released this week because of a software glitch that affected member submissions to the CFTC and ICE–this is especially unfortunate because, as I discussed last week, I expected to see a material reduction in speculative net length in this (and next week’s) positioning data to better contextualize the rout we saw in the latter half of last week that continued to pressure prices lower this week.
Russian Product Exports will need to contend with the finally-agreed-upon price caps, embargoes, and sanctions starting this Sunday, February 5th; while there was initially concern about the extent of the disruption, consensus opinion seems to be shifting toward, at most, a small and transitory disruption similar to what we saw with Russian crude exports following the December 5th sanctions start date.