Oil: Bearish fundamentals signal pull-back – TD Securities

TD Securities' Ryan McKay highlights a shift in oil market fundamentals, suggesting a potential pull-back in prices. The report indicates that a loosening of near-term fundamentals could reduce crude oil prices by at least $2-3/bbl, while geopolitical risks may also impact market dynamics. The analysis notes that supply issues are easing, with increased export flows from key regions.

Oil market facing bearish pressures

"We expect that a loosening of near-term fundamentals could shave at least $2-3/bbl off the latest crude oil rally, and should see the aggressive backwardations ease. We note that a major supply-altering event in Iran would nullify this, but also highlight that additional downside is possible should the easing of geopolitical risk premium coincide with the weakening fundamentals."

"Supply side issues that supported the market are now easing. Export flows from the port of Novorossiysk should recover notably as the third mooring (SPM-3) at CPC terminal is back from maintenance."

"Near-term demand could also take a hit as it appears the Chinese inventory stockpiling impulse has paused in January, with inventories actually drawing throughout the month. Furthermore, peak refinery turnaround season is around the corner, which will reduce refiner demand, leaving additional barrels available to the market."

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