Crude Oil

January 31, 2019

The Research Team reviews the Crude Oil market

 

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31 January 2019

  • The forward supply of crude oil is showing signs of a reduction. The most concerning factor for some market participants has been the fact that inventory capacity utilization (CU) has continued to grow. We beg to differ and our view is clearly outlined in the full report (available on request). Our proprietary systematic fundamental model is picking up a decisive shift towards lower supply for weeks #5 to #10. The market is expected to react on this imminently.
  • Our expectation for an uptick in demand in January has so far been justified but the magnitude of the increase has been disappointing. As a result, spot demand for oil remains relatively weak even after the improvement registered earlier in the month. Our forward view is different and it is bullish. The conclusion is partially based on improved refinery margins and lower levels of idle refinery capacity.
  • Our macroeconomic view has gradually evolved from firmly bearish to more neutral. Even if the strength of the USD has finally caught up with the commodity markets, our model has identified a number of price positive developments which are likely to affect the price formation in February. For example, the current short-term credit conditions remain weak but recent injections of credit in China across different debt maturities offer support to our view for weeks #5-10.

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