Oil Context Weekly (W32)
Crude prices fell back as Trump abandoned threatened Iran strikes and on renewed (though thus far unrealized) deal optimism; Hormuz flow inched higher while Red Sea flows are under acute pressure.
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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—including our ongoing tracking of shipping flows throughout the Middle East.
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Summary
Flat Prices fell $8/bbl for Brent to finish around $82/bbl; contracts sank sharply on Monday after Trump’s cancellation of planned strikes on Iran and further on Tuesday following a flurry of headlines promising an imminent Hormuz deal (spoiler: no such deal came).
Timespreads were flat-to-weaker, with indicators of physical market tightness easing alongside flat prices; still, all major benchmarks continue to sport historically-strong prompt backwardation of $1-2/bbl compared to the mini-glut-induced contango seen as recently as a month ago amidst the spike in post-MOU breakout flows.
Inventories data were mixed between a modest draw in ARA Europe and modest builds across the US and Singapore; inventories of all major products across all major importing hubs are running at or below its respective trailing five-year lows, leaving little “wiggle room”.
Refined Products rolled over after their recent heady rally but, even after US gasoline and diesel crack spreads fell by more than $10/bbl, both the key US road fuels continue to sport record-high crack spreads for this time of year.
Market Positioning data confirmed that speculators flipped to modest net sellers of crude futures and options contracts, though the small volume of hot money exodus compared to the sharp pullback in prices yields another bearish positioning print; this selloff, which brought prices nearly $20/bbl lower, was apparently little driven by the rapid liquidation of skittish spec positions and leaves further downside risk if remaining positions are shaken loose.
As Well As why’d Trump back down from strikes?; is Trump about to hand Tehran control of Hormuz?; and the latest tracking of Middle Eastern tanker flow, which is rising through Hormuz amidst a reestablishment of the dark ship-to-ship shuttle trade while at the same time collapsing in the Red Sea following the Houthi blockade of Saudi shipping.