In addition to our regular Monday CFTC COT analysis report, Onyx Insight will publish its own in-house CFTC COT forecast ahead of the official Friday report. The model forecasts changes in long and short positions using machine learning, utilising Onyx’s proprietary data.
The Nov’24 Brent Futures contract was volatile this afternoon, trading at $72.77/bbl at 12:00 BST and oscillating up to a high of $73.85/bbl around 16:20 BST before correcting to the $73.15/bbl handle by 17:00 BST (time of writing). This volatility could be attributed to market players adjusting their positions, both in cautious anticipation of the US Fed rate cut this evening and in reaction to EIA data for the week ending 13 Sep, showing that US crude oil inventories fell by 1.63 mb and production was down by 100 kb/d. According to a Reuters poll, analysts had predicted a 500 kb decline in US crude inventories, indicating that last week’s Hurricane Francine may have caused a greater drawdown than expected. In the news today, Bloomberg has estimated that Russian crude oil revenues have dropped by 30% since June, largely due to international benchmark prices falling and depressing the value of cheap Russian crude. This decline in Russian crude comes despite the fact the country’s oil exports averaged 3.21 mb/d for the four weeks leading up to 15 Sep, 80 kb/d higher than the four-week average to the week of 8 Sep. In other news, as the market becoming increasingly divided on the Fed action, former Cleveland Fed President Mester has said today she favours a series of 25 bps cuts rather than a 50 bps cut. Whilst Fed funds futures predicted a 61% chance of a 50 bps cut, major brokerages now expect a 25 bps cut including Goldman Sachs, Nomura, and Deutsche Bank. Whichever move the Fed makes at 19:00 BST, either cut will likely cause further volatility in crude prices. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.76/bbl and $1.78/bbl, respectively.
Nov’24 Brent Futures flat price declined this morning from $73.27/bbl at 07:00 BST down to $72.65/bbl handles at 11:20 BST (time of writing). Crude prices fell alongside API estimates showing an unexpected increase of 1.96 mb in US crude oil inventories on Tuesday. This weakness came in spite of bullish factors including escalation of conflict in the Middle East and the potential for a 50-basis point Fed cut to stimulate US economic growth. In the news today, the explosive pagers used against Hezbollah in yesterday’s bombing in Lebanon were alleged to have been modified by Israel’s Mossad spy agency at the production level. A Lebanese security source told Reuters that up to 3kg of plastic explosives were hidden in the 5,000 Gold Apollo brand pagers ordered by Hezbollah. The group has communicated via Telegram today that they intend to retaliate against the Israeli attacks. In other news, US Gulf Coast oil shut-ins have dropped to 102 kb/d as output recovers after Hurricane Francine dissipated on 14 Sep. The US is also seeking to increase their SPR by 6 mb of crude amid relatively low oil prices. Finally, Russia could hold off oil export cuts in October due to domestic refineries maintenance, as per Reuters. Furthermore, Indian Oil Minister Hardeep Singh Puri has stated that India will not change its energy policy to buy oil from the cheapest supplier, indicating that India will continue to buy cheap Russian crude oil. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.69/bbl and $1.61/bbl, respectively.
Nov’24 Brent Futures flat price rallied from $72.59/bbl at 12:00 BST up to $74.20/bbl handles at 17:45 BST (time of writing). In the news today, Venezuela’s largest oil refinery, the Amuay refinery, has been reported as offline since 12 Sep due to a power failure, according to Reuters. The refining facility has a capacity to process 645 kb/d and suffers frequent power outages due to a chronic lack of investment. In other news, two Chinese refineries, Zhenghe Group and Shandon Huaxing Petrochemical Group, were declared bankrupt today after creditors failed to agree on restructuring plans for the refineries, as stated by Bloomberg. The processing units at these plants have not been operational for several months due to refinery margins plunging, particularly in Shandong. Finally, South Sudan’s President Salva Kiir has agreed with the leader of Sudan, Gen Abdel Fattah al-Burhan, to export crude oil via Sudan, following months of disrupted supply due to a damaged pipeline network amid civil war in Sudan. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.72/bbl and $1.82/bbl, respectively.
September has been a month of many firsts in Brent futures: for one, the benchmark crude futures contract collapsed below $70/bbl on 10 Sep for the first time in three years. Soon after this feat, ICE COT data for the week ending 10 Sep reported that players were net short the Brent futures complex for the first time on record. Despite this weakness, Dated Brent and Dated differentials were shielded from the bears, with the physical differential briefly dropping to just above $0.99/bbl on 09 Sep to then rising to $1.275/bbl on 16 Sep. This relative support emerged due to strong buy-side forces present in the market. On 06 Sep, we saw Chevron offering WTI Midland across the curve, only for Totsa to lift the offer. Afterwards, we saw Gunvor and Petroineos buying Ekofisk and Midland cargoes, respectively, with BP and Glencore on the sell side.
The gasoline market has reached a bottom and has begun stabilising due in part to Hurricane Francine, which caused little damage, but the headline was enough to prompt some buying, it seems. Gasoline continued to drive poor sentiment in refinery margins in both regions, with only gasoil underperforming more. Two Sinochem oil refineries were declared bankrupt this week as the Sinochem Group indefinitely shut down two refineries in Shandong, China, due to high crude costs and weak fuel demand, which reflected poor margins and a sluggish economy. Unlike independent teapot refiners benefiting from discounted Russian, Iranian and Venezuelan crude, which, therefore, have been running at huge capacity, Sinochem faces higher costs, causing refinery utilization to hit a four-year low and a 2.3% decline in China’s crude imports in the first half of the year. Nov’24 RBBR reached a low of just above $7.00/bbl on 4 Sep and has strengthened to $9.00/bbl on 17 Sep. Will the market risk being long again after seeing such a risk-off month or two following the catastrophic start of the year (for some)?
Nov’24 Brent Futures flat price weakened this morning from $73.13/bbl at 07:00 BST to $72.50/bbl at 11:30 BST (time of writing). After last week’s upward trend, prices are relatively steady amid US output concerns, countering bearish sentiment caused by lagging Chinese demand. In the news today, Fed funds futures show markets are now pricing in a 69% chance that the US Federal Reserve will cut rates by 50 basis points, as per data by Reuters. A lower interest rate could potentially lift oil demand by supporting economic growth. In other news, the UK government is intensifying its crackdown on the oil trading empire of Hossein Shamkhani, the son of an advisor to Ayatollah Khamenei, Supreme Leader of Iran. The UK is continuing to scrutinise the business practices of London-based Nest Wise Trading, owned by Shamkhani, and has warned Shamkhani’s company with immediate dissolution due to its role in trading both Iranian and Russian crude. This comes as part of a broader crackdown in the UK and US on entities believed to be evading oil-trading restrictions. Finally, US Secretary of State Antony Blinken is headed to Egypt today to prepare a proposal to present to Israel and Hamas for a cease-fire deal and release of hostages. Blinken, however, has no public plans to meet with Israeli Prime Minister Benjamin Netanyahu on the trip. The visit comes amid Israel threatening to escalate conflict against Hezbollah. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.57/bbl and $1.41/bbl, respectively.
Another week brings another selection of new trade ideas from Onyx Research, this time looking at trades in Brent/Dubai, Eastern MOPJ naphtha, and Sing 92 gasoline swaps.
Nov’24 Brent Futures flat price climbed this afternoon from $71.76/bbl at 12:00 BST to $72.50/bbl at 17:25 BST (time of writing). The increase in crude prices comes as players wait and watch for further directional cues ahead of the Fed meeting on 18 Sep. The market is still hindered by bearish sentiment, however, amid demand worries in China and offline capacity in the Gulf of Mexico. In the news today, there has been much speculation as to whether the Fed will cut by 25 or 50 basis points. This will mark the first US interest rate cut since March 2020. Proponents of the view that the Fed will cut by 50 bps include Michael Feroli, analyst at JPMorgan, and Bill Dudley, the former New York Fed president and Bloomberg columnist. In contrast, Satyam Panday, chief US economist at S&P Global Ratings, foresees three cuts of 25 bps, one every Fed meeting for the rest of the year. Whichever way the Fed chooses to move on rates (25 or 50 bps), it is clear that the consensus is looking for a cut in the Sep/Nov and Dec meetings. In other news, in a note by Callum Bruce, Goldman Sachs has commented on oil price weakness, with Brent slipping below $70/bbl last week. Goldman Sachs claimed that Brent crude could recover to $77/bbl in Q4 ’24, on the condition that demand concerns abate, positioning and valuation recover, and OECD inventories remain somewhat below normal. However, their analysis also highlights the risk of comfortable inventory levels allowing the market to price in an expected 2025 supply surplus, potentially hampering recovery of crude prices. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.60/bbl and $1.51/bbl, respectively.
The Nov’24 Brent futures fell below $70/bbl on 10 Sep, reaching lows not seen since December 2021, before recovering to around $73/bbl by September 16, despite an oversold RSI and declining open interest. Meanwhile, the US 2-year treasury yield and Brent broke key support levels following hawkish BOJ comments and political developments, with the OIS now pricing in a more aggressive US Fed interest rate cut, indicating a potential recession. ICE COT data for the week ending September 10 shows money managers turning bearish, reducing speculative longs by 19.7% and increasing shorts by 15.5%, resulting in net positioning in Brent futures turning negative for the first time and the long:short ratio dropping to 0.80:1.00 for all weeks to 2013.
