10 July 2019
- Little has changed in our supply-side view for crude oil since our publications in May and June. There are still plenty of signs to suggest that we are in a period of looser global oil supply. This is clearly demonstrated by the chart of implied forward supply below. The combination of high inventory, low imports and stubbornly high domestic production are key parts of our argument. We do not anticipate any meaningful change in the supply. The global market is also well supplied with strong USA loadings and recovery of the Russian flows after the pipeline contamination issues in Q2.
- Our short-term demand assessment has improved. The positive change can be explained by the recovery in profitability of refineries and subsequent increase in their capacity utilization. The result is decent uptick in demand for this time of the year. Our forward demand view is less encouraging as we expect imminent slowdown on the back of weak economic data and seasonal cyclicality.
- Our short-term macroeconomic view remains bearish. Signals from the FX markets have not been price supportive for 5 consecutive weeks. The latest reading of our proprietary FX Impact Model is displayed below. It still points to further losses for the oil market in July. It is also worth mentioning how low are the speculative net long positions on the crude oil financial market. This is a short-term development which is less than 10 weeks-old but it comes to contradict the conclusions from the discussion on the previous page.