Oil Context Weekly (W6)
Crude prices rip ~$6.50/bbl higher, erasing nearly all of last week’s senseless price rout, on a litany of bullish supply developments including a long-threatened Russian "voluntary" production cut.
It was a busy week in oil markets beyond the booming price gains. The “Other Thoughts” section at the end—covering both the Russian production cut announcement and the tragic earthquakes that struck Turkey and Syria—is accordingly a bit longer than usual.
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 rose ~$6.50/bbl to erase nearly all of last week’s rout, benefitting from a litany of bullish supply-related headlines as well as the likely return of speculative flows that had evacuated contracts last week.
Calendar Spreads also retraced last week’s narrowing and prompt spreads reached their steepest level of backwardation since late-November.
Inventories data showed a mixed picture of builds across the US and ARA Europe coupled with a draw in Singapore; further muddling the inventory signal is the fact that European builds likely reflected precautionary stock building ahead of the Feb 5th import ban on Russian product rather than an oversupply of middle distillates in Europe.
Refined Products were comparatively slow this week vs what we saw in crude as markets await signs of what the reality of a post-February 5th embargo/price cap on Russian refined product exports really looks like.
Positioning data was once again withheld this week due to an ongoing challenge with data submission caused by a ransomware attack on a third-party software provider; there is no doubt that we market-watchers are poorer for the lack of positioning context and I hope this software issue is resolved quickly for the sake of market integrity and transparency
Russia’s “Voluntary” Cut of 500 kbpd of oil supplies effective March served to boost prices on Friday, but plenty of questions remain over just how “voluntary” the cuts are as well as whether they’ll end up taking the form of crude or refined products. (Much longer discussion of this development at the bottom of this report.)
Tragic Earthquake that devastated Turkey and Syria has also temporarily halted oil exports from the Turkish port of Ceyhan, which typically facilitates the export of roughly 1 MMbpd.