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Trader Meeting Notes: Nightmare Fuel (Oil)

Alexa, play Down by Jay Sean. What goes up must come down, and our old friend Brent Futures is once again staring down at the abyss. The bullish EIA stats reading was the perfect dead cat bounce for longs to get the hell out of there, as the US job growth revision fuelled bearish sentiment. Brent found support at the $76/bbl handle, but this feels like déjà vu. Time and time again over the last two years, just when traders thought Brent would capitulate, it always managed to find the floor at the low $70s. But as the famous investment disclaimer goes, “Past performance is no guarantee of future results.” Indeed, the holy trinity of bearish sentiments provided a perfect cocktail this week. Concerns about a US slowdown, namely its labour market and China’s economic misfortunes, paint a bleak picture for demand. Combine this with OPEC’s musings of bringing back barrels in Q4, and it’s no wonder the bears are so gung-ho.

The Officials: Dubai holds up, just don’t look at the Asian macros

22 August 2024: 09:30 BST Vitol doesn’t just set the floor in Dubai; they lift it. The Dubai physical premium (Physical minus M+2) rose 5cto 87c, while the Dubai physical discount relative to October Brent futures continued to narrow from-$1.86/bbl

Overnight & Singapore Window: Brent Rises to $76.50/bbl

The October Brent Futures contract has seen strength this morning, trading from a low of $75.84 at 09:00 BST up to $76.26/bbl at the time of writing (11:20 BST). In headlines, Nigeria’s Dangote refinery plans to source more of its feedstock domestically for Q3, reducing U.S. crude intake. Previously, less than 75% of its crude came from domestic sources; In July, Dangote signalled a shift away from U.S. imports, cancelling two tenders for 6 mb of WTI for September, as reported by Bloomberg. Starting in October, the refinery will purchase up to 445 kb/d in local currency and once fully operational, will process 650 kb/d, making it one of the largest refineries globally. In other news, Mohsen Paknejad was appointed as the new oil minister for Iran, emphasizing the need to boost production amid limited fossil fuel reserves. Iran’s oil output increased by 20% in July, reaching 3.27 mb/d, however sanctions and technological challenges continue to hinder development and exports, with 70% of its gas reserves still trapped underground, according to Reuters. The Oct/Nov and Oct/Apr’25 Brent spreads are at $0.46/bbl and $2.10/bbl, respectively.

CFTC Predictor: Sentiment tips in favour of the bears

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 Officials: Dead cat bounce gets Kennie again

21 August 2024: 16:30 BST In ‘The Officials’, Onyx Capital Advisory publishes outright values, spreads, cracks and boxes for the main energy commodities traded in the marketplace. The published values are determined independently and on a fair market basis by

European Window: Brent Falls to $76.30/bbl

Oct’24 Brent futures flat price has seen pressure this afternoon, from over $77.70/bbl at 14.00 BST to $76.30/bbl at 17.30 BST (time of writing). The EIA US inventory report revealed a 4.649mb draw in crude stocks compared to the 2.2mb forecast and a 560kb draw in stocks at Cushing, OK. Gasoline saw a draw of 1.606mb. This is less than the 1.8mb forecast, although PADD 1B saw a 1.825mb draw. Distillates saw a larger than forecast draw of 3.312mb, a 2.312mb higher draw than forecast. Refinery utilisation has seen a second consecutive week increase more than predicted, as it rose by 0.8%. The US economy created 818,000 fewer jobs than initially reported in the 12 months to March 2024, according to the Labor Department. This 30% downward revision highlights a weaker labour market. The biggest adjustment was in professional and business services, with 358,000 fewer jobs than first estimated. OPEC+ has limited room to increase output without risking lower prices due to rising supply from the US, Brazil, and Guyana, according to BP’s Chief Economist. If OPEC+ restores output in October, global oil markets could shift from a deficit to a surplus, per IEA data. The Oct/Nov and Oct/Apr’25 Brent spreads are at $0.58/bbl and $2.10/bbl, respectively.

The Officials: Vitol keeps Dubai premiums afloat

21 August 2024: 09:30 BST In ‘The Officials’, Onyx Capital Advisory publishes outright values, spreads, cracks and boxes for the main energy commodities traded in the marketplace. The published values are determined independently and on a fair market basis by

Overnight & Singapore Window: Brent Strengthens back to $77.60/bbl

The October Brent futures flat price performed better on Wednesday morning, rising from the $77/bbl level to $77.60/bbl at 11:30 BST (time of writing). API inventory data was lacklustre, as US crude stocks indicated a +347kb build against expectations of a 2.7mb draw. The crude build was more significant than the draw in gasoline and distillates, as previous consecutive draws in US crude stocks contributed to the sustained backwardation in crude.

Dated Brent Report – EFP-redicting a sell off?

The chasm between the reality of demand sentiment and the crude oil futures markets, by extension, and the continued relentless buying in the North Sea physical seems to have been driven even wider this fortnight. Oct’24 EFP continues to price relatively weakly on partials, pointing to a squeeze in the physical rather than genuine demand. Fundamentally, margins continue to struggle with product weakness, although the lower flat price lent a touch of support.

European Window: Brent sees resistance above $78/bbl

The October Brent Futures contract experienced a mixed afternoon, trading sideways initially between $77.50/bbl and $77.85/bbl before rallying up to $78.30/bbl around 15:00 BST and experiencing a strong correction downwards to trade at $77.30/bbl at the time of writing (17:30 BST).

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