Oil Market Has Bottomed With The Physical Oil Signals Going Higher
Over the past few weeks, we've been hammering away two points:
Global oil demand has bottomed.
If so, refining margins will move higher, and with a 2-3 week lag, Brent timespreads and other crude spreads should also move higher.
Fast forwarding to the end of August, we are seeing the indicators we said to watch out for bottoming.
Brent 1-2
Brent 2-3
With Brent's expiration coming, it's not enough just to pay attention to the 1-2 timespread. We have to also watch the incoming 2-3 to see if it's just an expiration shenanigan. As you can see, we are seeing the backwardation along the curve increasing, which is an encouraging sign.
This was expected somewhat because looking at the global refining margin tracker below, refining margins did improve over the past few weeks.