Oil Context Weekly (W21)
Crude prices bounce around but end a headline-crammed week down only modestly
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Every week, I summarize and analyze 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 were up, down, and ultimately mostly flat over a busy week that included renewed OPEC+ production chatter.
Timespreads remained relatively unchanged; prompt spreads remain durably, if modestly, backwardated while the broader structure of the curve is holding just stronger than the weakest level in years realized in early May.
Inventories data saw commercial stocks build across all major tracked hubs, though US inventories of key products remain quite low and, overall, the pace of builds has been slower than seasonally-average.
Refined Products products strengthened initially but then plunged back to earth on Friday, with gasoline, in particular, erasing nearly $2/bbl in refining margin in Friday trading alone.
Market Positioning data revealed that speculators were tiny buyers of crude contracts over the past week and net positions remain lower relative to recent experience; while market participants seem happy holding shorter net exposure to crude over recent months given the broadly bearish shift in sentiment that followed OPEC+’s production hike acceleration, there remains comparatively little downside positioning-related risk and mean reversion in these levels is expected to continue to broadly benefit prices over the coming weeks.
As Well As much ado about OPEC+ (again), Russia-Ukraine talks have yet to yield truce but show limited progress, Europeans attempt to lower Russian oil price cap, IEA axes so-called “Missing Barrels”, Fifth round of US-Iran talks caught up on disagreements over uranium enrichment, Schrodinger’s Venezuelan oil sanctions, and Canada’s new Energy and Natural Resources Minister sets positive tone for oil and gas priorities of incoming Carney government.