Oil Context Weekly (W50)
Crude prices rally back to the upper end of their months-long range on Chinese stimulus optimism, but more confirmation required to secure an upside breakout.
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Summary
Flat Prices rose more than $3/bbl to the upper end of their months-long range, boosted by renewed optimism related to Chinese fiscal stimulus and more hawkish comments from the incoming Trump administration toward Iran
Timespreads widened into steeper prompt backwardation this week, with WTI’s prompt spread more than doubling while Brent’s traced a similar direction by both started at a higher level and ended at a lower level; rising spreads lent fundamental support to the flat price rally, but appeared more driven by tight US crude stocks than an anticipatory rebound in Chinese demand.
Inventories data leaned a touch bearish this week between a large 3.6 MMbbl build in ARA Europe, a 1.6 MMbbl build in Singapore, and a 0.9 MMbbl draw in the US; while US crude stocks remain low, stateside product stocks continue to recovery, while gasoline stocks remain exceptionally high in both ARA Europe and Singapore.
Refined Products tightened across the two main transportation fuels, with diesel crack spreads reversing last week’s pullback to post a more than $2/bbl gain while gasoline margins continued last week’s rally but ultimately gave up roughly half its weekly gains as prices pulled back in Friday trading.
Investor Positioning data revealed that speculators were small net sellers of crude futures and options contracts over the past week through Tuesday, though their net position as a share of total open interest across the two largest crude contracts remains near the upper end of recent months’ experience.
As Well As news of a bigger Chinese fiscal stimulus push prompts commodities demand hopes, yet more Canada-US tariff sabre rattling, Trump’s national security advisor pledges return to “maximum pressure” campaign against Iran, and the UAE pares back shipments in apparent acquiescence to OPEC+ pushback on recently high output.