Since bottoming out in mid-December, WTI timespreads began a slow and steady climb higher and, in recent days, have approached a similar type of extreme positioning witnessed back in November.
Only part of that is down to fundamentals. Cushing has now seen three consecutive weekly draws in stocks according to EIA data – and that from a relatively low starting point (stocks were last measured at some 63% of the level seen over the same week of 2021). GSI data has again given us highly accurate readings ahead of time.
A combination of infrastructural, seasonal, and one-off factors are contributing. Structurally, the long-planned changes in midstream pipeline infrastructure are bringing more Canadian crude directly to the US Gulf Coast and thereby bypassing the Cushing storage hub. That is potentially what is behind falling preliminary import numbers into PADD-2 despite still strong Canadian crude production. But low stocks in PADD-3 despite continued releases of strategic barrels may also be dragging additional volumes out of Cushing at the moment. This may be especially relevant given year-end tax considerations that saw storage players shifting inventory out of the US Gulf Coast in December.
With all that said, WTI spreads also reflect to a great degree the prevailing bullish mood of the global crude market. ICE Brent market structure is following a similar path amid uncertainty over the availability of crude later this year, while global demand is rapidly approaching pre-pandemic levels. And as with all the main oil futures contracts, WTI managed money currently has a bullish skew with few holders of short positions.
GSI data gives us a glimpse of what is to come going forward, with initial readings for the next DoE showing a potential change in trend at Cushing. However, assuming a bottoming out of draws is confirmed this week by the EIA, it will likely take little heat out of WTI market structure given the wider context in the global oil market.