Core Viewpoint - Oil prices experienced significant fluctuations last week, with Brent crude falling to $68 per barrel, WTI to $63.55 per barrel, and Dubai crude to $67.74 per barrel, indicating a volatile market environment [2][12]. Price Spread - The absolute prices of oil showed a downward trend, while the month-on-month spreads for Brent and WTI significantly decreased, although the longer-term spreads remain elevated, suggesting a relatively tight balance in the compliant oil market [2][12]. - The Brent-Dubai EFS fell to $1.5 per barrel, and the WTI-Brent near-month spread narrowed to $4.8 per barrel, indicating a reduction in Brent's geopolitical premium [2][12]. Physical Discounts - The physical discount for North Sea BFOET remained stable, while Johan Sverdup's discount decreased to -$2 per barrel. WTI's discount for Northwest Europe fell to $2.7 per barrel, although it remains relatively high [3][13]. - In West Africa, discounts for Nigerian and Angolan oil accelerated their decline due to weak demand, while Ural crude's discount stabilized at $29 per barrel [3][13]. - The Middle East market showed signs of recovery, with the benchmark oil discount to Dubai rising to around $1 per barrel, aligning with the month-on-month spread [3][13]. Inventory - Global oil inventories (excluding China and U.S. SPR) have decreased to below 3 billion barrels since the beginning of the year, although the absolute inventory level remains high compared to the past five years [5][15]. - China's onshore crude oil inventory has stabilized at 1.2 billion barrels, with expectations of reduced purchasing activity due to the upcoming Spring Festival [5][15]. - The global oil shipment volume has decreased from 44.2 million barrels per day at the beginning of the year to 42.8 million barrels per day, primarily due to reduced shipments from Russian ports [5][15]. Refinery Maintenance and Profitability - As of February 6, global refinery shutdowns totaled approximately 5.4 million barrels per day, a decrease of about 880,000 barrels per day from the previous week, driven by the resumption of activities in Asia [6][16]. - U.S. refinery shutdowns were around 1.3 million barrels per day, with expectations of a slight increase to approximately 1.37 million barrels per day in the following week [6][16]. - The maintenance activities in the Middle East are expected to increase, impacting overall refinery operations [6][16]. Geopolitical Factors - The market is closely monitoring the situation in Iran, with ongoing negotiations between the U.S. and Iran showing a reduced probability of U.S. military action, which has not affected Iranian oil supply or the Strait of Hormuz [7][17]. - The situation in Ukraine remains unresolved, with ongoing negotiations but no significant progress, potentially impacting Russian fiscal revenues and negotiations [7][17]. - Venezuela's oil exports to the U.S. have increased, transitioning from sanctioned to compliant oil, with major traders beginning to re-quote prices to buyers in India and China [7][17]. Liquidity - Last week, cumulative positions in WTI and Brent decreased, but CFTC net long positions have been rising, particularly for Brent, which reached a near one-year high [8][17]. - Future expectations indicate a potential decline in net long positions as market dynamics evolve [8][17]. Overall Outlook - Oil prices are expected to maintain a volatile range in the short term, with ongoing geopolitical tensions and market adjustments influencing price movements [8][18].