The Dec’24 Brent futures contract continued to weaken this morning, falling from $74.80/bbl at 08:25 BST to briefly dropping below $74/bbl at 10:20 BST. While the benchmark crude futures contract found support here, it fell to $73.88/bbl at 11:35 BST (time of writing).
Markets took a moment to recalibrate today, following last night’s major dump on the story that Israel would not strike Iranian oil. Brent flat price crossed into the 73 handle we’ve been awaiting and closed the day at $73.73/bbl. Today had another very offered window as the Dated Donkey keeps getting smacked. BP, Glencore and Total offered down Ekofisk, while Shell and Glencore offered Forties, with Glencore offering a mid Nov Forties down to +46c over Dated. The physical diffs got spanked, from +$1.05 on Friday to +46c yesterday, and took another pounding today. The whole CFD curve slumped into contango, with balweek falling 54c from yesterday to -31c. Next week’s CFD fell 49c on the day too to -51c.
The Dec’24 Brent futures contract strengthened marginally this afternoon, trading at $73.96/bbl at 12:00 BST and reaching $74.20/bbl at 17:50 BST (time of writing). We saw volatility in price action throughout the afternoon amid the release of the IEA October oil market report, alongside concerns of conflict escalation in the Middle East. In the news today, the IEA has released their oil market report for October, showing global oil demand is set to increase by just 862kb/d this year due to decelerating demand in China. This latest estimate is down from the 903kb/d forecast published in the September IEA report. In other news, Israeli troops have begun clearing landmines near Golan Heights, signalling a potential expansion of ground operations against Hezbollah for the first time further east along Lebanon’s border, according to Reuters. Finally, Russian refinery maintenance has pushed the country’s oil exports to their highest level in three months. Average oil exports inched up by 7kb/d to 3.33mb/d in the four weeks to 13 Oct, as per data compiled by Bloomberg. At the time of writing, the front month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.37/bbl and $1.53/bbl, respectively.
The water has been anything but calm here in the North Sea, with the Dated Brent complex surging up into October amid a more robust futures complex and supported physical differential.
Traders live and die (financially) by the sword of their decisions. And it has been like this: hear War, buy! Hear Peace, sell! Hear economic news, hmm change that channel and let’s watch the War TV station. Here come the rumours… like Netanyahu promising not to hit Iran’s cities, nuclear plants, nor oil installations. (Can you trust him?) And the overbought market faints. Brent prices correct to the $73+ level. The drop sets the stage for the next uptick and just in time as Israel sort of denies any of the above. It is a ride with certain outcomes. The main players’ economies are facing headwinds and commodity prices reflect that from iron ore to oil. Geopolitics is red hot and any shooting will invite more shooting and this means, buy. But, but, but, the US does not want any shooting and neither do Europe’s main actors. They are financially too wobbly and the US elections means pressure on Israel not to shoot. Make your bets, people, but the outcomes are clear.
Another week brings another selection of new trade ideas from Onyx Research, this time looking at trades in fuel oil, gasoline and propane swaps. Our weekly Onyx Alpha report presents speculative and hedging trades based on technical analysis and data-driven tradecraft methods on Onyx Commitment of Traders (COT) and Flux Financials data.
The Dec’24 Brent futures contract showed weakness throughout the morning, trading at $78.09/bbl at 07:00 BST and falling to just above the $77.00/bbl handle at 11:15 BST (time of writing). Price action has been weak amid a continuing lack of confidence in China’s economic stimulus to combat deflation and increases in Libyan crude output. In the news today, the National Oil Corporation (NOC) stated that Libyan crude production has recovered to 1.3mb/d, reaching levels seen before the political dispute over Libya’s central bank. In other news, the US said it will send US troops to Israel along with an advanced anti-missile system. US President Biden has stated that this decision was meant to “defend Israel”, according to Reuters. US officials have yet to announce how quickly their forces will be deployed. Finally, China’s first ultra-deepwater field, Deep Sea 1, is reported to have produced 9 billion cubic meters of natural gas and 900,000 cubic meters of oil to date, as per Xinhua. This development comes as the China National Offshore Oil Corporation (CNOOC) seeks to reduce the country’s reliance on foreign hydrocarbons. At the time of writing, the front month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.38/bbl and $1.80/bbl, respectively.
The Dated Donkey got whacked, and all the candy fell out. If you are short! The North Sea window was super offered with Glencore, BP and Totsa all trying to shift North Sea grades, and values got smoked! Incinerated really, and almost back to where the values should be if the market is long, which it is! This was very evident with the offer price of Forties. Glencore offered Forties down to +$0.75 over Dated, far below Gunvor’s bid at +$1.15 on Friday. Gunvor where are you when the Dated Donkey needs you? BP also piled in and was offering down a CIF Ekofisk to +$1.80 over Dated. Totsa didn’t miss out on the action and jumped in, offering down a FOB Ekofisk to Dated +$1.25, far lower than BPs offer for +$1.95 over Dated on Friday. But no one found any takers. According to traders, “the physical diffs got smoked”, falling to around 50c from over a buck on Friday. This week’s CFDs got demolished, falling from 47c before the window to just 7c after.
The Dec’24 Brent futures contract strengthened slightly this afternoon, trading at $77.27/bbl at 12:00 BST and moving up to $77.36/bbl at 17:15 BST (time of writing). Despite a mid-afternoon rally to $78.10/bbl at 14:50 BST, price action saw downward pressure amid OPEC’s cut to their oil demand forecast. In the news today, OPEC, in their Oct’24 monthly oil market report, has reduced their forecast for global oil demand growth from 2.03mb/d to 1.93mb/d for 2024, as per Reuters. Poor Chinese demand accounted for most of this reduction, trimmed down by OPEC from 650kb/d to 580kb/d in the report. In other news, Israeli forces have intensified their strikes on north Gaza, shifting their focus to the city of Jabalia. At least 10 people were killed in an Israeli attack on a food distribution centre in the city, according to Palestinian medics. Meanwhile, in China, the Chinese People’s Liberation Army (PLA) has begun air force, navy, and army drills in the Taiwan Strait. Senior Captain Li Xi of the PLA said this display serves “as a stern warning to separatist acts of Taiwan independence forces”. Finally, Algeria is set to announce a new oil and gas licensing round, in which majors including Exxon, Chevron, Eni, and Sinopec are expected to bid, according to Reuters. At the time of writing, the front month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.42/bbl and $1.85/bbl, respectively.
This week, the Brent futures complex witnessed volatility amid the dichotomy between rising geopolitical tensions in the Middle East and nervousness surrounding oil demand growth in China, the world’s second-largest oil consumer. In the Middle East, the atmosphere remains tense as the world worriedly waits to see whether Israel will attack Iranian oil and nuclear infrastructure following Iran’s firing of over 180 ballistic missiles on 01 Oct in response to Israel expanding the war into Lebanon. The US has reportedly sent US troops to Israel along with an advanced anti-missile system in an attempt to “defend Israel”, adding to concerns of a significant escalation of the conflict. On the other hand, sentiment remains subdued due to China’s beleaguered economy and uninspiring fiscal reforms announced by the government. The market long awaited the Chinese Finance Minister Lan Fo’an’s comments on further stimulus packages on 12 Oct. While the ministry pledged to “significantly increase” debt to revive the economy, it did not mention an official nominal value of the fiscal package, leaving financial markets unsettled.
