Crude
US crude inventory, SPR plus commercial combined, are going to draw hard over the summer as runs accelerate in the WoS and with Asia pulling hard for as many replacement barrels as it can get.
Cushing stocks will also draw (they have already started to) as exports are maxed out from the USG and with PADD-2 intake set to rise seasonally.
The shift from Afra TA trade to VLCC Asia trade may put TD25 rates under relative pressure.
WTI/Brent over the summer may be have to trade narrower to eventually cut off max US exports to the world once inventories get low enough.
Although the market is losing medium sour barrels from the AG, the premiums in medium sour crudes in the USGC peaked early April and have since drifted lower.
The remaining SPR stock in the USGC is majority sour in quality.
Add on to our call that WTI/Brent is expected to narrow further to prevent exports, Mars unlikely to get exported to the East.
The combination of the above should weaken USGC sour crude FOB premiums further.
Oil Narratives
With 10-11 mpd of production shut-in and global inventories drawing down massively, the fundamentals point to a severe supply shock that has yet to translate to flat price.
Trump’s talking down of the market cannot go on forever as fast diminishing inventory levels make their way to the forefront.
Reinventorizing will also be key theme after the SoH is reopened.
UAE now able to increase production outside of OPEC+ quotas will not cause a significant dent in the short term when we are already short 1 billion barrels of inventory.
