Oil Context Weekly (W51)
Crude prices fell as the Fed’s hawkish outlook hit risk assets, while steady-to-stronger term structure reassured that this was a sentiment and flows-driven selloff more so than anything fundamental.
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Summary
Flat Prices fell roughly $1.50/bbl to end around $73/bbl Brent, starting off the week with yet another rangebound yo-yoing before getting pulled lower alongside other risk assets following the US Federal Reserve’s more hawkish updated guidance.
Timespreads firmly outperformed flat prices, signaling that while physical markets aren’t exactly screaming tightness they continue to indicate that this latest selloff was driven far more by flows and macro sentiment than any oil-specific fundamentals.
Inventories data was mixed across major hubs but the largest-ever inflow of Singaporean fuel oil stocks put a bearish tilt on the week, with ARA European stocks rising into further oversupplied territory while US stocks remain low for this time of year.
Refined Products were split between a notable pullback in gasoline margins, flatter diesel performance, and ongoing strength seen in fuel oil crack spreads that is in turn supporting heavier and sour crude differentials around the USGC.
Market Positioning data revealed that speculators were sizable purchases of crude futures and options contracts over the past week-through-Tuesday, bringing the net speculative position to its highest level in five months; this rebuilding of speculative length occurred despite barely $1/bbl of crude gains, representing a notable point of concern regarding the durability of current price levels, even if the purchases represented the other side of year-end producer hedging.
As Well As the Fed’s comparatively hawkish pivot pulls risk assets lower, Chinese oil majors split on when domestic demand peaks, and the G7 considers tighter Russian oil constraints.