Oil Context Weekly (W25)
Crude prices attempted to find their comfort level amidst back the Israel-Iran headline rollercoaster, while futures curves steepened into backwardation and diesel starkly outperformed.
Happy Friday, Oil Watchers!
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.
In the latest episode of the Oil Ground Up Podcast, I spoke with Jeff McGee—fellow Substacker and head of Makai Marine—for a bit of a Tanker Market 101: how tankers work, their role in facilitating global petroleum flows, which indicators to follow, and what those indicators tell us about the state of the oil market.
I joined a former Alberta Finance Minister to speak about Canadian energy independence and future Canadian pipelines on the C.D. Howe Institute’s video podcast.
I chatted with Financial Post’s Larysa Harapyn about the state of the oil market, which unsurprisingly focused on the state of play in the Israel-Iran hostilities.
I spoke at length with Politico about how the Iran-risk could boomerang back at the US economy and then to Reuters about how to track this ever-evolving oil market risk.
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Summary
Flat Price whiplashed between the low- and high-$70s per barrel of Brent crude, ending the week ~$3/bbl higher at just more than $77/bbl.
Timespreads are stronger on the week and both prompt spreads and the broader curve structure have rallied back into steep backwardation, at least temporarily overriding the bizarre curve structure described in Oil’s Wrinkle in Time.
Inventories data saw some big shifts, including a wildly-bullish, crude-driven draw in the US and a very large, crude-driven build in ARA Europe.
Refined Products markets have been dominated by a rush for middle distillate (i.e., diesel, gasoil, and jet fuel) amidst spiking import demand stemming from the loss of both domestic refining capacity in Israel and broader natural gas supplies in the region, while gasoline has remained more subdued
Market Positioning data for Brent (WTI data delayed until Monday) revealed that speculators were the largest weekly net buyers of crude contracts since last October, driven by both fresh length but even more so by the liquidation of short positions that had been weighing on the belly of the curve.
As Well As Iran and Barrel Risk: Three Scenarios, Iran’s crude is getting even cheaper, Israeli and Iranian refineries at risk, and the inefficiency of geopolitical prediction markets.