16 April 2019
- There are signs that suggest we are entering a period of looser global short-term oil supply. The combination of a renewed pick up in inventory accumulation, abnormally low imports and stubbornly high US exports, as well as record Russian exports is worth noting. For example, our oscillator indicates the gradual re-appearance of tighter inventory capacity. Our concern is that the inventory increase is not a result of strong demand but rather a function of abundant supply.
- Our short-term demand assessment is bearish, even if our expectation for an uptick in demand in March actually materializes. We remain somewhat disappointed by the magnitude of the up-tick in demand. Additionally, there are signals that momentum might be slowing down. Direct evidence is offered by the deterioration of refinery margins which have started to have an impact on the amount of idle refining capacity.
- Our short-term macroeconomic view has also deteriorated and made an important contribution to our overall market stance. The Currency Impact Index was neutral for weeks reflecting to some extent the indecisive trend of the USD. Our quantitative FX model continues to pick up the strengthening purchasing power of key oil consumers which will likely support demand in the short to medium-term