Crude oil futures market maintained the stronger note from late February on developments in the geopolitical arena amid continued petroleum fuel inventory draws in the USA outweighing concern over economic growth. Thus, while Nymex WTI ended the weekly period at $60.69/b or 77¢ lower, the weekly average rose24¢ to $61.24/b. According to the CFTC, in the first weekly period noncommercials reduced their shortpositions at a faster rate than longs resulting in an increase in net long positions of some 10,300 to a sixmonth high of 36,300 lots. Open interest rose some 6,000 lots to 1,275,200 contracts. With options included, open interest increased a healthy 22,600 lots to 2,290,200 contracts.
In the second weekly period, weather concerns faded amid declining petroleum stocks in the USA. Nymex WTI front-month contracts ended the week $2.76 or 4.5% lower at $57.93/b with the weekly average down $1.17 to $60.07/b. However, the CFTC revealed that speculators’ positions were little changed amid a slight rise in the longs and an offsetting decline in shorts. Hence, net long positions rose 800 lots to 37,100 contracts. Open interest closed 47,000 lots higher at 1,322,200 amid an increase mostly in the commercial sectors. With options included,open interest furthered the escalation rising by 57,300 to 2,347,500 lots.
In the third weekly period, ongoing concern over global economic developments continued to exert downward pressure on the petroleum complex. Nymex prompt month ended the week down $1.20 at $56.73/b with the weekly average at $57.23/b or 4.7%lower. Nevertheless, geopolitical developments kept the crude market in check amid some concern over seasonal fuels. The CFTC revealed that in the third weekly period non-commercials reduced short positions at a faster ratethan longs, resulting in an increase in net long positions of nearly 7,300 to 44,400 lots. Open interest fell for the first timein four weeks dropping 9,700 to1,312,500 contracts. With options included, open interest was even lower, showing a significant loss of 89,800 to 2,257,700 lots.
In the final weekly period, revived concerns over gasoline supplies amid rising demand in the USA and emerging developments in Mideast geopolitics caused crude oil prices to surge $6.20 or over 11% as the new Nymex front-month contract closed at $62.93/b with the weekly average up by $4.65 to $61.88/b. For the same period, the CFTC reported that net long positions for noncommercials dropped 4,200 lots to 40,200 as shorts rose at a faster rate than longs. Open interest was some 18,000 lots higher at 1,330,500, and with options included, the volume was inflated a further 56,400 lots to 2,314,100 lots.
On a monthly basis, non-commercial net-longs’ weekly average displayed the highest level since August, at 39,500 lots versus 1,300 lots in the previous month and at 47,900 contracts in the same month last year. Geopolitical developments and concern over seasonal fuels amid growing US fuel demand kept market bullishness intact. The weekly average for open interest was 1,310,100 or 30,600 lots higher than in the previous month and 357,200 lots over a year ago. Nymex frontmonth contracts averaged $60.74/b in March or $1.35 higher than in the previous month.
The Forward Structure
The contango spread widened further into March with the daily average for the1st/2nd month spread at $1.75 or 94¢ wider than in the previous month. The contango spread in the forward structure widened further in the farther months. The 1st/6th, /12th and /18th month spreads were $4.59, $6.05 and $6.58/b or $1.39,$1.07 and $1.08 wider than in the previous month respectively. In y-o-y terms, the 1st/2nd, /6th, /12th and /18th month spreads were $1.49, $3.65, $4.64 and $4.65/b. The US crude oil stocks weekly average was 328 mb or 1.7 mb higher than last month, but 11.4 mb lower than last year. While concern over winter fuel supply eased in the early part of the month as warmer weather kept market sentiment calm, the refinery maintenance schedule has contributed to the strength of later months when refineries are expected to return.