Note: This article was first published by HFI Research subscriber. This is part of our new Daily Oil Quality report.
Oil prices are falling slightly today in Brent that does not make WTI and minimizes the spread of Brent-WTI. The move now appears to be speculators throwing long positions at the OPEC + JMMC meeting. In the case of surprises, speculators are conducting cautionary stance on being on the sidelines. Meanwhile, in the macro front, it appears that China / US trade war warms to lead to lower risk appetite for oil price forecasts.
But, in the physical market, the divergence continues in Brent 1
321 Crack Spreads vs WTI
Source: CME, HFI Research
321 Crack Spreads vs Brent [19659012Category:CMEHFIResearch As you can see from the charts above, the physical oil market remains healthy despite the macro head concerns. Whatever the financial speculators are doing now, the physical oil traders are completely ignored. For the US market, we know that unplanned losses continue to weaken the US crude oil discharge in recent months. But this will change over the next few weeks while high 321 crack cracking indicates higher refinery refinement.
Additionally, another measure that we track properly is global oil-on-water, which reached the lowest level in the past 3 years. The decline since the beginning of May comes from a steep drop in Iranian crude exports where tanker tracking services are pegging at ~ 500k b / d. Logistical issues in the near term set up Iranian exports, but we do not expect it to support going forward.
But this confirms the physical oil market appetite for crude as a lack of oil-on-water means only less supplies globally. As the launch of global refineries in the summer, the physical situation of the oil market will be more stringent and more stringent, which will eventually be higher in oil futures prices. Our view is that algos, along with energy investors, live in edges until they see evidence of storage repositories, but especially in the US. Once the US storage is dropped, that's when the flow of funds will come back.
For our trade in UWT, we will remain long and hold up to $ 69 to $ 70 / bbl target. The steep backwardation of Brent timespreads tells us that we will witness the largest crude drawdown from 2011.
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Disclosure: I / we are long UWT. I wrote this article to myself, and it expressed my own opinion. I do not receive compensation for it (except Alpha Search). I have no business relationship with any company whose stock is mentioned in this article.