Oil Context Weekly (W30)
Oil Context Weekly (W30)
Crude prices fall for the third week in a row as weakening physical market indicators get supercharged by further speculative liquidations.
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.
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Summary
Flat Prices fell roughly $2/bbl for Brent to end the week just above the $80/bbl mark, feeling the combined downside pressure of weaker physical market indicators and speculative selling from overextended speculative participants.
Futures Curves saw backwardation ease notably, adding physical justification to the flat price selloff after calendar spreads served as a durably bullish counter to easing prices for much of the past month; however, most spreads are, at worst, now flat on the month compared to a nearly $6/bbl flat price pullback off early-July highs and, thus, continue to paint a comparatively optimistic picture.
Inventories data leaned bullish with large draws in the US—reversing last week’s hurricane-distorted build—and ARA Europe, offset only slightly by a modest build in Singaporean stocks.
Refined Products strengthened in contrast to weakening crude prices and structure as both gasoline and diesel crack spreads gained ~$1/bbl on the week, supported by large US inventory declines.
Investor Positioning data revealed that speculators were net crude sellers for the second week in a row, shedding the most positions since early June following the OPEC+ meeting; while these confirmed sales combined with additional likely spec selling given price weakness over recent days likely put us around a neutral positioning level today, the propensity for speculative participants to overdo these cycles on the downside will likely maintain spec positioning as a headwind for prices over the coming weeks, though it is no longer the one-way risk it was as recently as last week.
As Well As a new round of OPEC+ “compensation cuts”, Kyiv sanctions against Lukoil tighten eastern European crude supplies, India secures approvals to import more Venezuelan crude ahead of presidential elections this weekend, wildfires destroy much of Jasper, AB and threaten recently-completed TMX pipeline, and the likely delay of the planned TMX sale until after the next Canadian federal election.