Oil Context Weekly (W31)
Crude markets eased amidst a tentative pause in US-Iran fighting before tightening anew as strikes reignited and spread to critical Saudi oil facilities and as far west as Egypt.
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—including our ongoing tracking of shipping flows throughout the Middle East.
Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.
For more public oil context, check out my comments in the Atlantic’s Great Chinese Oil Mystery and the China Talk podcast (audio) alongside friend of the newsletter Arnab Datta. China is the topic du jour and we’ll be publishing a full exploration of what I’m calling “The Beijing Swing” next week.
Also, read Datta’s Odd Lots newsletter for the best summary that I’ve seen to date about how much farther—both legally and technically—the US Strategic Petroleum Reserve can decline. Spoiler: I’m not too worried about any hard near-term constraints, and expect the Trump administration to announce a second SPR release after the completion of this first programme should the Hormuz disruption continue to drag on.
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 slumped coming out of last weekend, shedding ~$12/bbl from last week’s close through Tuesday before finding a floor and stabilizing around the $90/bbl Brent level, down ~$7/bbl on the week.
Timespreads followed the trajectory of flat prices, weakening through Tuesday before strengthening back into steeper backwardation; the sharpest moves were in Dated Brent-to-Frontline (DFL) spreads, which whipsawed between a high of $8/bbl last week and a low of sub-$2/bbl on Tuesday but ultimately ended the week—and the September prompt contract—at ~$6/bbl.
Inventories data leaned bullish as draws across the US and Singapore offset a crude build in ARA Europe. US stocks drew again following two consecutive large builds, with both crude and gasoline sitting at precariously low levels for the time of year; ARA European diesel stocks are crashing and all major Singaporean products sit at the bottom of trailing seasonal norms.
Refined Products whipsawed amidst further attacks against refineries in both Russia and Saudi Arabia, with both US gasoline and diesel crack spreads hitting Hormuz crisis highs mid-week before pulling back through Friday trading.
Market Positioning data confirmed that speculators were modest net buyers of crude futures and options contracts, a bearish development over a week in which crude prices fell sharply (Tuesday vs Tuesday); with the net speculative position now back to the mid-point between recent highs and lows, positioning no longer presents a clear bullish impulse for crude prices given more balanced go-forward risks.
As Well As Eerie silence after suspected attack on Saudi Arabia’s most important oil facility; Drone strikes expand to Egypt and threaten Suez Canal; Middle East shipping flows remain turbulent (and dark again); and attacks on the CPC Terminal yo-yo Kazakh oil market access.