The physical Dated market remains very strong, with the physical differential remaining in triple figures for around ten days now, at 104c/bbl on 25 Nov. There has been a slight introduction of softness this week as players are pricing in the physical, which is projected to come off into December. In the window, all eyes have really been on Totsa in the past week or so as they have been supporting the physical diff with good cargo buying, potentially for placing into Chinese refineries. There seems a slight unease in the market as they expect this play to end soon and the gap between the physical support and the forward curve, which has seen some softening on expectations of this. We don’t know how much more ammunition they have here, how many more barrels they can buy before the rug is yanked from the market. Talking of Yanks, we are expecting strong US exports in the coming weeks, with Midland cargoes likely flooding the Dated market. How much of this wave Totsa is prepared to buy is another question.
On the financial side, there has been decent buying in the prompt two CFDs in 02-06 Dec and 9-13 Dec from a European major which has also kept the differential supported, although a trade house has been selling the bal-week. This same trade house has been offering the strip for a week or so. There was better buying in the backend of December, with the 30-03 Jan vs Cal Jan seeing really heavy selling from majors and trade houses. This seems quite optimistic regarding the market’s potential absorption of the US barrels, but refineries should be out of maintenance, and there may be better demand here.
DFLs rallied well this fortnight. The Dec’25 DFL has risen to 75c/bbl on 26 Nov from sub 40c/bbl levels a week ago. Lots of the same players that are lifting the CFD structure have been buying DFLs as the 9-13 Dec CFD bidding has been setting a strong print, alongside a major buying out of 16-20 Dec, with the trade house selling the Dec strips. Trying to enter the sell-side of structure at the moment seems tricky with the relentless buying in the physical and paper, however, there is good risk/reward at entering short in the extremely elevated parts of the Dated complex.
