The oil market managed to close higher for a third consecutive week as expectations for a tighter market continued to pull in speculative money. The latest positioning data shows that the managed money net long in ICE Brent increased by 18,150 lots over the last reporting week to 158,371 lots as of last Tuesday. The move in NYMEX WTI was even more aggressive. Speculators increased their net long by 45,151 lots to 235,816 lots – the largest position since mid-April. We continue to hold a supportive view towards Brent, although there are concerns around demand, such as US gasoline demand and Chinese apparent demand.
Drilling activity in the US continues to slow. The latest data from Baker Hughes shows that the oil rig count fell by 6 over the week to 479 active rigs – the lowest since December 2021. Not only are we seeing lower drilling activity, but completion activity is also slowing. Primary Vision’s frac spread count fell by 9 over the week to 237.
The ICE gasoil crack continues to find some support after bottoming out in late May. The crack has strengthened from a little under $17/bbl in late May to more than $21/bbl currently. Speculators have become more constructive on the market, and this is reflected in positioning. The ICE gasoil managed money net long increased by 19,456 lots over the last reporting week to 99,404 lots – the largest position since March 2022. Gasoil stocks in the ARA region have fallen below the 5-year average in recent weeks, which is providing some support. A similar move has occurred in middle distillate stocks in Singapore. In addition, a supply disruption from the Pernis refinery in the Netherlands and the potential for disruptions from the 240k b/d Gravenchon refinery in France will also provide some support.
The Al-Zour refinery in Kuwait reported that a fire broke out at a storage facility over the weekend. However, the fire does not appear to have had any impact on operations at the 615k b/d refinery.
Russia will allow refineries to export gasoline in July, extending a temporary allowance which has been in place since late May. Earlier in the year, Russia banned gasoline exports for 6 months starting 1 March due to concern over domestic availability, partly due to the continued Ukrainian drone attacks on Russian energy assets.
