Head of Commodity Strategy, Saxo Bank Group
Summary: The latest EIA report showed a rise in stocks, sending prices a tick below the $60/b level in the immediate wake of the release.
Production cuts from the Opec+ group of producers have been the main reason for the dramatic recovery since the 38% price slump during the final quarter last year. In fact the recovery has been so strong and swift that WTI is currently heading towards its biggest quarterly gain – currently 32% – since Q2 2009 when the recovery from the global financial crisis saw it jump by more than 40%.
The pull from funds primarily speculating at the front of the curve has supported a jump in the Brent crude oil prompt spread to $0.6/b backwardation while the contango in WTI crude oil has been reduced to -$0.16/b.
The biggest short-term risk to the oil market is likely to be driven by renewed stock market weakness as it would help erode the recent pick up in risk appetite, particularly considering that the fresh addition of 124 million barrels during the past month up until March 19 has brought the total net-long to 505 million barrels.
WTI crude oil is currently trading in the middle of a $57.70/b to $61.6/b range. The weekly inventory report highlighted below initially sent the price of both oil and products lower by 0.5%.
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