Crude Oil Analysis: Houthis, China and the Case for $97 Brent
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Key Points:
- Brent's cap is a wasting asset: the SPR sits at 307.65 mb, 88 mb below the DOE's 396 mb policy floor, and is drawing 3.8 mb a week.
- US refiners ran at 97.2% of capacity, above the ten-year maximum band, and US diesel is up roughly 16% in four weeks to $5.31/gal heading into harvest.
- Money managers are crowded short at the 87.5th percentile while producers cut their hedges by 61,979 contracts - the funds and the barrels are on opposite sides.
We can take it that the blunt force we have seen from The Houthis have served as a strong warning shot across the US bow. The threat is a most real and present danger to the energy markets. Despite this, oil price remains contained. So, with initial sparring subdued, talks between Tehran and Washington are continuing in earnest, brokered by Pakistan.