Oil Narratives
Clearly crude futures have been relatively sanguine up to this point. $110 is “more like it” but the ceiling is likely substantially higher.
It will be months before normal supply chain is re-established once SoH opens.
ICE Brent that was trading within $95-105/bbl range was far too low in our opinion. But what is fair value when 15% of market is missing? Demand loss can be rapid and will eventually, potentially rapidly, kill off very high prices.
Flat price & Brent spreads present interesting opportunities in each risk-on/risk-off cycle.
The US is a key exporter in the Atlantic Basin whose oil is already in high demand. The draw on US oil inventory is really only just getting started in earnest now. But far more is to come.
Asia's demand for WTI is now huge and may even steal market share from Europe. US products also in high demand.
At some point US crude and oil product pricing will have to strengthen versus European and Asian equivalents, to defend domestic inventory.
Export bans are a key tail risk with HOGO and TI/Brent reflecting new concerns about it this week.
Physical crude has tumbled over April.
To a degree there has been risk-off in product pricing in some cases.
Asian product swaps have priced down vs West.
Retail gasoline prices are coming down!
