Market Update

Off the back of another tense week with the recent attacks by Iran on Israel, Greg, Jorge, James and Martha discuss the impact (or, lack thereof) the event had on oil prices. As a bonus for this episode, Jorge and Martha will provide a trade idea each!

Prices were around $89/bbl last week, but since then there’s been a noticeable uptick – not quite reaching $92/bbl and oscillating around $90/bbl since.

Refinery margins have weakened, with refined products struggling – with the exception of gasoline. Gasoil is extremely weak, with poor distillate performance in all regions. EBOB has seen greater strength with the market keen to buy into last week’s weakness.

Brent Futures have made a notable climb since last week, hitting $89/bbl on Tuesday morning. It’s crucial to analyse the impact of recent developments on oil demand. Notably, both China and the USA have seen expansions in manufacturing activity, marking significant milestones. What has been the impact of headlines regarding tighter supply and the possible contagion of geopolitical turmoil in the Middle East?

Group CEO Greg Newman, Head of Learning & Development James Brodie, and Research Associates Martha Dowding and Vincent Wu are back to get you up to speed on micro and macro changes to the oil market – from a trade idea dubbed “The Widow Maker” to major headlines from Russia and the US.

With Group CEO Greg Newman abroad, Light Ends Direct Trader James Todd steps up to host World of Oil Derivatives for another market update episode.

Since last week, Brent Futures price rallied from sub $83/bbl this week to over $87.50/bbl yesterday. The breakout from its previous range came on the back of a flurry of bullish headlines – including drone attacks on Russian oil infrastructure, draws in both crude and gasoline inventories in the US, and positive Chinese economic data.

Looking to the refinery margin, there was strength across all products, outweighing the rally in the flat price last week, so the refinery margin saw a small increase.

Crude flat price has been remarkably neutral in the past week, sitting around $82/bbl (slightly down from $83/bbl). However, the market has found a genuine equilibrium – a price level where everyone seems happy.

Looking to the refinery margin, Naphtha showed significant strength with the MOPJ crack for April exceeding -$5/bbl, while Mar/Apr in the NWE region remained robust at $20/mt. Gasnaphs saw a rise from $185 to $195/mt for April, which drew bids at the relatively cheaper levels. EBOB experienced a $2/bbl rally this week, returning to strength.

The key global macro movers this week are gold and the S&P 500, which continue to make all-time highs. We should also be watching for a stronger US dollar – as European and UK data continue to weaken, while the U.S. economy remains resilient.

In our “Googling Oil” segment, Greg, James and Vincent discuss further Ukraine attacks on Russian oil infrastructure ahead of Russia’s presidential election this weekend. The other key headline this week is the OPEC and IEA being at their most divided in their oil demand forecast since at least 2008.

Vincent’s trade idea this week is Long Apr/May Brent/Dubai box.

Oil markets are all of a sudden kicking into gear, and it seems we are now on that highway to the danger zone. With every market indicator of the underlying physical market strong, and forward derivative prices indicating that this will last for some time, the only thing left to truly perform is the outright price.

Will this carry through? And will the danger zone of inflation, demand destruction and overextension grip oil markets once again?

It’s been a bullish week in the crude market, which continued into a very strong Brent expiry for April futures. On the flat price side, it’s still a bullish tone but remaining range bound.

Refinery margins have seen a stark contrast week-on-week between the European and Asian refinery margins, which has come from a divergence in the gasoline market between the two regions.

The one to watch this week is China, as its announced its aim for an economic growth rate of 5% in 2024,and CPI around 3% – which aims to add 12 million urban jobs in 2024.

And on our Googling Oil segment, the main story to follow this week is OPEC members extending production cuts in bid to boost oil price.
Finally, Vincent’s trade idea for this week is to short April or May Sing 0.5% crack.