7 August 2017
- We still see lower supply of crude oil on the physical market for weeks #32-34 which is providing some support to the price. Our definition of spot supply is the availability on the physical market in the next two weeks. The supply conditions in the second half of August (forward supply) look different due to the sustained de-stocking effort. Return on storage jumped which was a short-term price supportive development but we expect the return to revert back into negative territory later in the week.
- Demand for crude oil in the short-term is outright bearish. Refinery margins have weakened and spot and forward purchasing activity on the spot market dropped. The only positive sign is the abnormally low level of planned refinery capacity outages but we expect same to increase imminently.
- Our macroeconomic view has deteriorated further (see chart below). Money market liquidity has improved which is directly affecting the short-term prospects of the oil price in a positive way but the rest of the variables in our model look discouraging. One such example is the Currency market which remains in strongly bearish mode as far as crude oil is concerned. Oil has clearly not benefited fully from the US$ weakness since Feb-March and our currency indicator caught the price negative pressure well