You can’t turn back the clock. But you can wind it up again.

Bonnie Prudden

The oil complex ended the week in negative territory confirming that the market is once again focused on the reality of the global glut of oil rather than the potential for a production freezing deal. A deal that would cap production of a few key oil producers at record high levels hit in January. Discussions with other producers is ongoing with Russia suggesting that talks are likely to continue through the rest of February.

One chose or view in the market is the reality that the global surplus will continue through 2016 and into 2017 if production is left to seek its own level based on the market price of oil. The price that will accelerate the rebalancing of the global market has not yet been found as the surplus is still in the 1.8 to 2 million bpd level even with the current price of oil trading either side of $30/bbl.

The second view for market participants to follow is an intervention path. With OPEC and select non-OPEC countries intervening to support the price of oil by cutting production or at least freezing production. Cutting production seems to be off of the table for the moment. Freezing production at January levels is the only proposal that has at least been discussed for more than a week. Whether or not a freeze deal gets done it is still not going to result in the global oil market entering into a sustained re-balancing pattern at an accelerated pace.

With Iran indicating that they would not be freezing their production until they recover to pre-sanctions levels even with a freeze by a few key producers the deal is still going to result in an increase in OPEC production in 2016 and thus supply still outstripping demand for the foreseeable future.

The above two scenarios are what will dominate the trading action going forward. For now the reality view is dominant as there is a lot of skepticism as to whether or not a freeze deal will even get done.

Both the April WTI and Brent futures contract prices ended the week with a loss for the third week in a row. Most all of the major equity markets increased last week with the US dollar appreciating versus most currency pairs.

The Apr Brent/WTI spread ended the week with Brent continuing to trade at a modest premium over WTI even with the spread narrowing for the week. The April Brent/WTI spread narrowed after widening for the previous four weeks.

The expiring (Feb 22) Mar Nymex WTI contract moved into a new lower technical trading range bounded around $28/bbl on the lower support side and $30/bbl on the upper resistance end. The soon to be spot Apr contract is in a range of $30/bbl on the lower end and $32/bbl on the upper, resistance end. The market decrease last week was primarily driven by a lack of confidence that the global oil market is going to return to balance position anytime soon.

On the weekly snapshot of oil inventories last week the EIA reported an across the build a modest build in total combined stocks of crude oil and refined products hitting another new record high level.

The Apr Brent contract decreased slightly more than the decrease in the Apr WTI contract resulting in the Apr Brent/WTI contract narrowing. With US refinery runs increasing and with imports increasing strongly total crude oil inventories still increased modestly last week.

HO and RBOB depreciated versus WTI on the week. The HO & RBOB crack spreads narrowed on the week while the widely followed 3-2-1 crack spread also narrowed.

The Mar WTI contract increased by 0.61 percent or $0.20bbl last week as total combined crude oil and refined product inventories increased during the report period. The Apr Brent contract decreased by 1.93 percent or $0.65 bbl.

The spot Apr Brent/WTI spread narrowed by $0.19/bbl. Crude oil stocks were unchanged in Cushing but increased in PADD 2. At the end of last week the spread remained in the technical trading range with $0.50/bbl on the support side and a positive $1.50/bbl on the resistance end.