12 June 2018
- Supply of crude on the global market continues to grow. This strongly price-bearish development is evident for spot (0-2 weeks ahead) supply, which has been steadily increasing since week #18. We still expect the process of gradual global de-stocking to continue well into June. We would like to reiterate that this is more related to the seasonal/sub-seasonal cycle than any additional pressure from the longer-term industrial cycle. We see this as negative news for the price of oil as the vast majority of released oil ends up as export.
- Demand remains firm but the signs of weakness from June onwards that we mentioned in our previous research note remain in place. In fact, our weekly metric for spot crude oil demand diverged from the price during/after week #15. It is worth mentioning that a key argument in favouring lower forthcoming demand was the collapse of our refinery Profit Margin Index. The sell-off experienced by the market in the last 2 weeks helped the margins re-adjust. As a result, the margin model we use is now firmly in bullish territory.
- Our macroeconomic view remains outright bearish. As long anticipated, short-term credit conditions are starting to provide the drag for demand. This is should not change even with the recent rebound in lending activity. According to our Currency Impact Index the renewed USD strength hasn’t been felt by the oil market just yet. On the contrary, the purchasing power of key oil importers has actually increased.