There was a battle for the barrels in the North Sea, with Totsa and Trafigura buying heavily and Equinor and Gunvor on the sell side. We have seen this same group of players swaying the flow in the Dated market for a few weeks now. The comparable power in the buying and selling has allowed for the Dated physical differential to move very little. The diff has been oscillating around 100c/bbl for almost a month now, failing to maintain anything 10c above or below a dollar since mid-November.
Looking at the implied physical differential for next week, there is a clear drop to the mid-60s. There has been a clear difference in the attitude between the weeks in the two halves of December. The second half of December is looking bearish, with the aforementioned drop in the implied diff.
In the financial market, the front CFDs have seen much heavier volumes and more axed. There is still some decent buying in the 16-20 Dec 1 week roll, although this has been sold into by a market maker and a major. A major sold 02-06 Dec and 09-13 Dec vs Cal Jan in size, although they sold lower than they are pricing now, even though it appears the market is long the 09-13 Dec week pricing.
The 23-27 Dec CFD has seen the 1, 3 and 4-week rolls all well bid by two trade houses and a major. This part of the curve may have been oversold recently but has now somewhat corrected. However, backend Dec and prompt Jan rolls are coming under pressure. We have seen selling from funds, although trade houses are hitting backend Dec and Jan CFDs, with rolls coming under pressure.
In the backend, in Q2’25, there has been fund selling and major buying in very good size in DFL options puts. There is some selling in the DFL to hedge this which could represent an expectation of further Q2’25 selling. As we approach the end-of-year period, there is always the possibility of an end-of-year bear play, as we saw from a trade house last year. The Jan’24 DFL fell from +2c/bbl on 21 Dec to -50c/bbl by 2 Jan around this time in 2023. Looking at market conditions, this may be less possible this year with the firmness and consistency of buying that we have seen from the bull players in the North Sea; this may be bought up and contribute to a further rangebound market.
