29 November 2018
- The supply of crude oil continued to increase throughout November. There is little evidence to suggest that supply flow will abate in the next couple of weeks. This is the case for both spot (2 weeks out) and forward (4 weeks out) supply. The most concerning development is the fact that inventory capacity utilization continues to grow. This has so far been a strongly negative development indicating very weak mid and downstream demand.
- Demand for oil remains abnormally weak.Our current view of bearish spot and forward demand is partially based on weak refinery margins. The fact that refinery idle capacity is so low provides some food for thought. We anticipate an uptick in demand in December but this is again down to supply control (or the lack of it) that will dictate the price action during the month.
- Our macroeconomic view remains bearish. Short-term credit conditions have deteriorated which continues to weigh on prices. It is worth mentioning that we still expect an increase in liquidity in China from end-November onwards which will provide some support to activity and prices. The strength of the USD is finally catching up with the commodity markets. The impact from imbalanced forex markets will likely persist also in early December.