The front-month (Feb’25) Brent futures contract has seen a supportive performance in the past week, rising to highs of $74.50/bbl on 13 December – but has come off to the $74/bbl level on 16 December (time of writing). This week,
Feb’25 Brent futures rose from $71.00/bbl on Dec 9 to $74.60/bbl on Dec 13, before correcting to $74.00/bbl on Dec 16. The daily upper Bollinger band acted as resistance at $74.50/bbl. Volatility slightly increased, although Bollinger bands remained narrow, while open interest dropped from 515mb to 420mb (Dec 4-12). The MACD signalled growing bullish momentum. Market support stemmed from speculation on China’s demand stimulus, despite no concrete promises and geopolitical concerns over Israel eyeing up the vulnerability of Iran’s nuclear facilities.
The Feb’25 Brent Futures contract experienced a weaker morning session, trading down from around $74.20/bbl at 07:00 GMT to $73.94/bbl at 10:35 GMT (time of writing) as traders take profit and await the Fed’s interest rate decision, with market expectations of a 25bp cut. In headlines Libya’s largest refinery, Zawiya (120 kb/d capacity), suffered fires over the weekend caused by gunfire during armed clashes, prompting the NOC to declare force majeure on Sunday. While the fires were controlled by Monday, the force majeure remains in place amid urges for the government to end clashes to prevent further damage and potential loss of life. This incident underscores ongoing risks to Libya’s oil industry, despite recent production gains, with output reaching 1.59 mb/d in October after resolving earlier political disputes and blockades. In other news, China’s refined oil consumption peaked in 2023 at 399 million metric tons (approximately 8 mb/d) and is projected to decline by 1.3% in 2024, according to CNPC’s Economics & Technology Research Institute. This decline is largely attributed to the rapid expansion of the EV sector, with forecasts suggesting that by 2035, EVs will make up half of the country’s car fleet, alongside increasing adoption of alternative fuels for trucks. At the time of writing, the Feb/Mar’25 and Feb/Aug’25 Brent spreads are at $0.38/bbl and $1.68/bbl, respectively.
The Feb’25 Brent futures flat price initially saw a decline this afternoon from around $74.10/bbl at 12:00 GMT to $73.60/bbl at 14:05 GMT, before recovering to $74.40/bbl at 17:50 GMT (time of writing). Bullish sentiment has persisted as Russia launched an extensive aerial attack today on Ukraine’s power grid, using 93 missiles and nearly 200 drones, as per Reuters. Ukrainian officials stated six unspecified energy facilities were damaged in the western region of Lviv, in addition to serious damage to thermal power plants, according to DTEK, Ukraine’s largest energy provider. In other news, the presidential decree banning Russian companies from selling oil and petroleum products at the price cap set by the G7 countries has been extended until the end of June 2025, according to Russian news agency Interfax. Finally, US-based Kosmos Energy said it is in early preliminary discussions to buy Tullow Oil, with a view to potentially expanding their African oil assets. Kosmos currently has oil production and exploration assets in basins offshore Ghana and Equatorial Guinea, while Tullow Oil owns offshore production platforms in Ghana, Gabon and Cote d’Ivoire. At the time of writing, the Feb/Mar’25 and Feb/Aug’25 Brent futures spreads stand at $0.39/bbl and $1.67/bbl, respectively.
Both the eastern HSFO and VLSFO complexes have seen generally lacklustre performance in the past two weeks, with both the 380 East/West and 0.5 East/West declining to $2.25/mt and $34/mt on 12 Dec, respectively, representing fortnightly decreases of around 30% and 20%. The European HSFO and VLSFO cracks also saw weakness but managed to recover over the fortnight, while the Jan’25 Euro Hi-5 contract is currently supported at $61/mt on 13 Dec at time of writing, having rallied from $51.50/mt on 02 Dec.
Iran v Israel, again On Monday, we forecast that the front-month Brent futures contract would end the week between $71 and $74/bbl. As of Friday, 8:30am GMT (time of writing), the contract is trading at around $73.60/bbl, well within this
he Feb’25 Brent futures contract strengthened this morning from $73.45/bbl at 07:00 GMT up to $74.10/bbl around 10:50 GMT (time of writing). Crude oil prices saw support amid reports that Russia attacked Ukrainian energy facilities this morning, targeting power substations and gas infrastructure, industry sources told Reuters. In the news today, Russian forces are advancing towards the Ukrainian city of Pokrovsk, now focusing on consolidating control of the Donetsk region in eastern Ukraine where Russia occupies over 60% of the territory, as per Reuters. In other news, Canadian oil producers plan to hike output next year, with Cenovus setting a growth target of 4.4% between 805kb/d and 845kb/d, driven by the start-up of the Narrows Lake oil sands project. Suncor also aims to boost production in 2025 by 4.4% to between 810kb/d and 840kb/d. Finally, Nigeria’s Seplat Energy is set to revive hundreds of Exxon’s idle Nigerian oil wells after completing its purchase of Exxon’s onshore oil and gas assets in the West African nation, according to Bloomberg. Seplat plans to increase oil output by 200kb/d, with CEO Samson Ezugworie stating in a Thursday interview that only 200 of around 600 blocks are currently producing. At the time of writing, the Feb/Mar’25 and Feb/Aug’25 Brent futures spreads stand at $0.37/bbl and $1.58/bbl, respectively.
With the confirmation of OPEC+ delaying their output hikes, it looks like crude flat price will cling on to 70 for a while longer. The group has certainly bought themselves some more time, but at what cost? That is not a rhetorical question. Their market share is eroding as fast as Manchester City’s form, and our global oil balance suggests that it would be wise for the group to delay the cuts until 2026. Event risk has been one of the sole bullish drivers of flat price, with the flurry of headlines coming out of both the Middle East and Eastern Europe. But for a sustained rise, global crude demand must play ball. Climate activists will rightfully point out that the world is consuming as much oil as ever, but if you followed the narratives in our market you would be forgiven to think that we have already reached peak oil and that the end is nigh. But in the near-term, OPEC+ have really tightened the market. North Sea physical differentials remain supportive, gasoline cracks are on the rise, and US crude inventories are seasonally on the low side. We expect the bears to win the war, but the bulls are winning out this battle, demonstrating some exceptional resilience.
The Feb’25 Brent futures contract initially saw weakness this afternoon, falling from $73.60/bbl at 12:00 GMT down to $72.45/bbl around 16:10 GMT, before recovering to $73.65/bbl at 17:30 GMT (time of writing). Crude oil prices were elevated amid reports that Israel is preparing for potential strikes against Iranian nuclear infrastructure, according to The Times of Israel. In the news today, the Kremlin has stated that Russian President Putin backs Hungarian Prime Minister Orban’s efforts to achieve a Christmas ceasefire in Ukraine and a major exchange of prisoners of war, as per Reuters. In other news, Saudi Arabia plans to ship 46mb of crude oil to China in January, the highest volume since October and significantly higher than the 36.5mb of volume expected in December, as per Reuters. Sinopec and PetroChina is expected to lift more crude, as well as non-state owned refiners Rongsheng Petrochemical and Shenghong Petrochemical. Finally, Germany’s oil product sales increased 6.2% y/y to 7.602 million tons in September, with heating oil recording the highest rise of 45.9% y/y to 1.114 million tons and jet fuel seeing the biggest decline of 18.7% y/y to 0.714 million tons, according to BAFA. At the time of writing, the Feb/Mar’25 and Feb/Aug’25 Brent futures spreads stand at $0.39/bbl and $1.67/bbl, respectively.
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.
