In the week ending 29 Jul, the two major crude oil futures benchmarks (Brent and WTI futures) strengthened, buoyed by rising risk to global supplies as the US threatened to levy sanctions on buyers of Russian energy. There has been little progress regarding US trade agreements with China and India. At the same time, the US has upped its tariffs on Indian and Brazilian goods, alongside an unspecified penalty on India for purchasing Russian crude oil. The uncertainty generated from this tariff disagreement may have filtered into risk assets such as oil, with total open interest in Brent+WTI futures declining by 75mb (-1.6%) in the week ending 29 Jul. This removal was driven by Brent futures, which saw a 90mb decline in open interest (-3.2%), likely from shorts stopping out as prices breached the critical $70/bbl barrier. On the other hand, open interest saw a relatively muted 15mb (+0.8%) increase in WTI futures. Producers/merchants were risk-off, pointing to an unwinding of refiner and producer hedging. Onyx’s general assessment for M1 refinery margins declined in the week ending 29 Jul, moving from a high of $9.35/bbl to $7.50/bbl, amid rising crude prices and a softening middle distillates complex.
