Collapse at the prompt

The possibility of a coordinated SPR release is seriously denting the sentiment and upside risk in crude oil futures markets. Japan is now considering seriously an SPR release, while China confirmed that it was already destocking its strategic stocks. The US also released stocks last week, but these releases were part of the scheduled releases up to 2031. Interestingly, the collapse of front-month ICE Brent futures, now at 78.8 $/b, did not materialize as much for long-dated futures. The easing term structure shaved about 2.3 $/b of the current prompt price over the week. Furthermore, the collapse in ICE Gasoil cracks also played a key role last week, responsible for a 1.3 $/b decline, as European lockdowns tanked the Northwest European demand expectations. 

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