Oil Context Weekly (W2)
Crude spiked back above $80 for the first time since mid-October as new US sanctions on Russian oil shipments further tighten already fundamentally strengthening market.
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Summary
Flat Prices rallied >$3/bbl after contracts shot higher in Friday trading on the back of the most notable intensification of US sanctions on Russia’s oil industry since first imposed in 2023; however, prices only reacted so abruptly because this surprisingly bullish sanctions announcement came on top of an already-tightening global oil market, which has steadily strengthened through early 2025 trading.
Timespreads strengthened aggressively, confirming a strong realized bid for prompt and spot barrels and reflecting a legitimate concern about near-term supply availability (rather than simply and entirely another speculative-driven rally).
Inventories were mixed, caught between road fuel-driven builds in the US and draws across both ARA Europe and Singapore; to start the year, US petroleum stocks are low thanks to crude at the bottom of its trailing range while ARA European inventories are high thanks to ample supplies of gasoline and diesel.
Refined Products were starkly split between gasoline, margins for which fell ~20%, and diesel, which held steadily through the week and then received a shot in the arm from the Russia sanctions announcement and crack spreads promptly rallied to more than $25/bbl.
Investor Positioning data revealed that speculators were once again net buyers of Brent crude futures and options contracts (CFTC WTI data delayed until Monday) over the past week through Tuesday, breaking us out of what had been a durable slump in managed money appetite for crude (bullish) but also now rising to levels associated with overbought concerns (bearish); while the rally does appear fundamentally justified given far stronger crude term structure, market participants should be wise to the heightened risk of sharp, short-lived pullbacks as this rapid reaccumulation of speculative positioning finds some balance.
As Well As US intensifies sanctions against Russian oil and major Chinese port bans calls from US-sanctioned vessels.