Blue Lacy Advisors, LLC - October 23 Crude Oil Market Update
Minneapolis, MN | November 3, 2022 | By: Steve Sinos, Blue Lacy Advisors, LLC
Since early September, prompt oil has traded in an ~$85-95 range. The 12-month strip was similarly range bound but at ~$80-90, dragged down by backwardation. With the last two weeks retesting the upper end in prompt trading and extending backwardation, we are looking at distinctly different risks between the short and intermediate term. The known risks in the near term relate to the world’s ability to respond to demand (which we’ve framed previously as regional competition). These fears underpin most bullish theses, and bullish analysts point to low storage numbers to emphatically express their views. Global product inventories rose ~28mm bbls through the end of September. Through the four weeks, global crude oil inventories built at a pace greater than two times the historical norm, adding ~1.4mm bpd through the week ending October 14th. This is likely because of stockpiling, refinery outages, and longer voyage times. Onshore European inventories approached 500mm bbls, driven by French, Italian, and Dutch imports, which exceeded 10mm bpd combined. This narrowed the gap below average inventories, which sat at 100mm bbls at the end of September. In the US, the Strategic Petroleum Reserve (“SPR”) releases have allowed commercial oil stocks to remain closer to normal than in Europe. The SPR releases have pushed total stocks down to ~842mm bbls, the lowest level in more than 10 years, but at 437mm bbls, commercial stocks are roughly in line with the median level of the last 10 years.
*This summary is based off October 23, 2022
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Meet the Author!
Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.
He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.
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