Oil Context Weekly (W30)
Crude prices continue to spiral upward, temporarily breaking back above $100/bbl as the Iran War escalated and the Houthis more directly joined the conflict with a “maritime ban” on Saudi Arabia.
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.
Also a reminder that paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.
If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.
Summary
Flat Prices rose ~$9/bbl from last week’s close for Brent crude to end Friday trading around $97/bbl, reaching as high as $102/bbl on Thursday amidst escalation between the US and Iran as well as the partial direct entry of the Houthis via threats to Saudi Red Sea shipping.
Timespreads exploded into steeper backwardation, with Brent DFL’s leaping from ~$1/bbl to a peak of $8/bbl before pulling back to around $5/bbl on Friday; Brent is currently seeing the greatest tightness but all major crude grades ratcheted into steeper backwardation as prompt tightness returned alongside re-piqued and broadening Middle Eastern supply risk.
Inventories broadly rose over the past week driven above all by a NGL-heavy build in the US; the previously aggressive pace of stock draws has waned, though overall inventory levels remain depleted across the US, ARA Europe, and Singapore.
Refined Products rolled over after weeks of ramping prices, with US diesel crack spreads giving up $5/bbl vs Brent this week and gasoline margins crashing $10/bbl; however, like with inventories above, while lower on the week, both US gasoline and diesel crack spreads remain at all-time seasonal highs without much immediate structural relief in sight.
Market Positioning data confirmed that speculators were once again net-buyers of crude futures and options contracts, though the positioning swing continues to run weaker than you’d expect given the pace of price gains, a bullish combination confirming likely additional, non-speculative pressure involved in pushing those prices higher.
As Well As in search of a true TACO clearing price, and Yemen’s Houthis opened a second Strait-front in the Bab el-Mandeb.