Oil Narrative & Trade Overview

Extreme margins here to stay

Oil Narratives

Massive divergence between crude and products (but crude is now in the balance).

General reluctance to be long Brent when headline reversal can hit any time, but incremental price gains have brought us to $90.
Lack of spare capacity now in the market (ex-China who are unwilling due to crude concerns).
Headline reversal (e.g. TACO!) hits crude any time, but can’t get rid of the diesel problem.
Stellar margins won’t necessarily increase crude refining from here.

Crude price gains will be a slow burn until inventory runs lower, unless we see more widespread attacks on infrastructure in the AG.

IEA are likely to release more SPR.
China probably more likely to keep imports of crude low
US commercial inventory draws slowed as net-exports peaked in May and then slowed.
But more WTI demand from Asia for Q4 probably speeds this up now.
Yanbu now a big question mark
Will Houthis allow Northbound traffic, or try to stop all Yanbu loadings? A pass for China/more dark activity likely.