1. Can We Get a Little Contango Now?
- China’s swelling oil inventories and weakening crude demand as well as an alleged 12-million-barrel buildup in US stocks (still not confirmed by the EIA as it skipped this week’s publishing schedule due to maintenance) have weakened WTI to $76 per barrel, the lowest since July.
- While prices may be up for a technical rebound, the descent of WTI has also radically shrunk backwardation in the futures curve, potentially even setting the scene for the first period of contango in many months.
- Depleted stocks at Cushing, the delivery point for the NYMEX WTI contract, have been pushing the US benchmark higher in September and October, but a recent string of inventory builds there weakened the relative standing of WTI.
- ICE Brent futures have been shrinking, too, as the six-month spread narrowed to $1.30 per barrel from $9.33 per barrel at the end of September, signaling that the market expects only limited upside to prices in the longer run.
2. Panama Canal Tightness Gets Worse and Worse
- The outlook for navigation across the Panama Canal is worsening as the worst drought in decades compelled the Latin American country to cut daily reservation slots even lower, aggravating delays.
- With the usually humid summer season seeing very little rain, Panama now enters the first El Nino dry season in years, curbing available daily slots from 31 to 18 by February, to be carried…