Oil’s New Year resolution – a scenario
Commentary summary:
• January should see various over-extended price signals mean revert with lots of perceptions built up over Q4 needing to change.
• Concerns over the EU molecule ban and US willingness to follow through on secondary sanctions are rightfully fading.
• Chinese import quotas and Indian mean reversion in Russian buying is liable to see legit spot crude hit harder after a potentially tighter-than-anticipated year-end.
• Extreme refining margins are cooling off and are even seeing some types of margins get too low.
For me the most surprising price signal of the last week or two has been prompt Brent spreads which have hovered at times at some +70c. A key related question for us internally has been “where is this oil glut?”.
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