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.
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Summary
Flat Prices rose ~$7/bbl for Brent to end above $96/bbl amidst fresh military escalation in the Gulf, a spiralling refined products crisis, and mounting signs of stress in prompt crude availability; this price move marks a full unwinding of the prior week’s pullback, the highest weekly close since late-July, and leaves prices within less than a dollar of the highest weekly close since May.
Timespreads ratcheted into steeper backwardation, once again, across all major crude grades this week as WTI, Brent, and Dubai crudes all sport prompt backwardation of ~$3–5/bbl (and in that order); this tells us that, while not as tight as diesel (prompt spread > $6/bbl), crude markets remain physically tight in their own right.
Inventories data showed draws across all major tracked commercial hubs, with stocks of key road fuels continuing to show acute strain globally; US crude stocks fell for the first time in a month, though desperately-low diesel stocks inched higher for the first time since July.
Refined Products markets saw diesel reach all-time high crack spreads following confirmation that Moscow would extend its diesel ban through the end of the month while prompt gasoline crack spreads rolled off with the end of driving season but remained ~4x higher than the seasonal average, still pushing $40/bbl vs Brent.
Market Positioning data confirmed that speculators were once again notable net buyers of crude length and that while some upside room remained the balance of position-normalization risks is increasingly to the downside; in the world of refined products, speculative length in gasoline is enormously high (top 4% over past 20 years) and risks a sharp reversal, while still only moderate net length in middle distillate contracts reaffirms diesel’s fundamentally-driven rally.
As Well As current Hormuz oil flow is likely around 8 MMbpd and my thoughts on Rosneft’s chief highlighting China’s newly dominant role in Hormuz oil market management as overtaking OPEC’s traditional perch.