WTI: Bearish flows face tightening backdrop – TD Securities

TD Securities’ Ryan McKay and Bart Melek highlight ongoing selling pressure in WTI Crude as CTA liquidation nears completion while high crude flows through the Strait of Hormuz keep sentiment bearish. They note Iranian shipments now dominate Hormuz transits and floating crude in the Gulf has dropped sharply, implying flows may soon slow. Meanwhile, global inventories are drawing quickly and product cracks remain strong.

CTA selling nears end as balances tighten

"Relentless crude oil selling. While our gauge of CTA selling in crude oil has been a slow drip, and is likely coming to a conclusion, crude flows exiting the Strait at a clip of 6-6.5m b/d in the last two weeks continues to see the market turn extremely bearish."

"However, Iranian flows are now representing nearly half of those Hormuz transits, while oil on water in the Mideast Gulf is falling sharply, dropping nearly 30m barrels in this timeframe."

"With only 40m barrels of floating crude remaining in the Gulf, these elevated flow rates should only last another week, after which time Iranian flows and increased production will be relied on, suggesting a notable reduction in flows."

"Meanwhile, global inventories continue to drawdown at a fast pace, and with SPR flows and US exports likely to slow into July, draws may begin to pick up pace ex-US."

"Elsewhere, petroleum product crack spreads remain robust as markets tighten and demand remains strong, which will likely see refiners continue to run hot."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)