12 November 2020
- The intensity of the selling pressure on the physical market continues to abate. This was an important factor behind the market strength in recent days and we are glad that we documented it on time. Regardless of these positive development, we continue to record increase in crude oil supply on the spot market which is not necessarily acknowledged by the price yet.
- Our spot crude oil demand view remains bearish but there are encouraging signs that the situation is changing. As published 2 weeks ago: “Fortunately for the bulls’ camp, we identify tentative positive signals for demand in November streaming out of our proprietary Global Refinery profitability Index. We notice that there has been noticeable improvement in profitability which bode well for demand, November onwards.” Our expectations have been met as we notice decline in the idle refinery capacity globally.
- The macro environment for crude oil continues to show structural weakness. On the positive side of the argument is the process of credit creation and velocity of credit – both of which remained supportive of the prices throughout August, September and most of October.