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.
Nov’24 Brent Futures flat price initially declined this afternoon from $70.60/bbl at 12:00 BST down to a low of $69.06/bbl at 15:50 BST, testing the key psychological support level of $70/bbl again before rebounding up and touching $70.90/bbl at 17:40 BST (time of writing). The drop below $70/bbl likely triggered a sell-off as traders moved to minimize exposure to further downside risk. However, the swift recovery above $70/bbl may suggest strong buying interest at this critical level, with potential upside momentum. In the news today, EIA data for the week ending 06 Sep showed US crude inventories rose by 0.833 mb, below market expectations of a 1 mb rise, whilst US crude oil imports increased to 1.526 mb, compared to a 0.85mb draw over the previous week. According to Bloomberg, the increasing stockpile of US inventories has added to concerns about an oversupply of crude. In other news, Libya’s oil exports have plummeted to 194 kb/d, which is an 81% w/w decrease in exports, as per data by Reuters. The situation remains uncertain as the political standoff over control of the central bank continues between Libya’s rival governments. Finally, the National Hurricane Center has stated that Hurricane Francine is due to hit Louisiana this afternoon, with operations now suspended at Port Fourchon, a key energy services hub and supplier of equipment to offshore oil producers in the Gulf of Mexico. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.45/bbl and $1.12/bbl, respectively.
International propane continued to see bullish interest this fortnight, although this strength was more reflected in spreads than in flat price, with the latter drifting lower in line with the weakness in crude. This strength in spreads was most pronounced in Saudi (CP) propane, with the Q4/Q1’25 CP propane spread climbing from $10.50/mt on 30 Aug to just shy of $20/mt on 10 Sep before easing off to $17.15/mt on 11 Sep (at the time of writing).
The November Brent Futures contract has seen a stronger morning, steadily climbing to $70.84/bbl at the time of writing (11:20 BST) following the sharp sell-off yesterday, amid expectations that Hurricane Francine may disrupt oil and gas production in the Gulf of Mexico. We noted that Brent fell yesterday amid no visible changes in fundamentals as risk aversion gripped markets; this was evidenced in gold moving higher and bond yields declining markedly. In headlines, Exxon is planning to cut production at its 523 kb/d Baton Rouge refinery to 20% ahead of Francine’s expected landfall, as reported by Reuters.
Nov’24 Brent futures flat price has plunged below $70/bbl this afternoon for the first time since December 2021, pricing at $71.20/bbl at 12:00 BST and reaching a high of $71.81/bbl at 14:30 BST, before diving down to $68.97/bbl at 17:30 BST (time of writing). The sell-off may have been exacerbated by a large number of longs stopping out, especially as prices fell below the $70/bbl psychological level. This comes amid expectations of ample supplies and demand concerns amid weak economic data out of vital economies such as China. In August, Chinese imports increased by just 0.5%, missing expectations for a 2% boost, and down from 7.2% growth a month prior. In the news today, OPEC lowered their global oil demand forecast for 2024 again from 2.11 mb/d to 2.03 mb/d. Until last month, OPEC kept the forecast unchanged since it was first made in July 2023. OPEC also cut its 2025 global demand growth estimate to 1.74 mb/d from 1.78 mb/d. Prices slid on the weakening global demand prospects and expectations of oil oversupply. Meanwhile, the EIA’s forecast for Brent crude oil prices reaching $84.44/bbl in 2024 has been lowered to $82.80/bbl. Correspondingly, their forecast for 2025 has been reduced from $85.71/bbl down to $84.09/bbl. Finally, Tropical Storm Francine continues to barrel across the Gulf of Mexico and is on track to become a hurricane this week. Still, we have yet to see any robust indication of how this hurricane could impact US oil supplies. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.42/bbl and $0.96/bbl, respectively.
The Dated Brent market has weakened significantly this past week as physical sentiment deteriorated alongside a troubled futures market. At the time of writing, the Nov’24 Brent futures contract has fallen below $70/bbl for the first time since November 2021. Bearish factors have mounted as oil demand uncertainty and recession fears grip the market, whilst speculators are getting increasingly shorter. The bearish hysteria has filtered into the Dated Brent market, where the physical had previously been able to weather the weakness in the futures market. However, the weaker-than-expected Oct Brent futures expiry was a premonition for Dated Brent, as the physical attracted offers whilst the paper sold off.
Light crude, not-so-light selling. That has been the spotlight in Brent/Dubai over the past week, with the Oct’24 contract descending from over $1/bbl at the end of August to $0.50/bbl on 10 Sep (at the time of writing).
Another week brings another selection of new trade ideas from Onyx Research, this time looking at trades in fuel oil and gasoline 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 November Brent futures contract has seen a weak morning, falling from $71.70/bbl at 07:00 BST to $70.78/bbl levels at 11:20 BST (time of writing). In headlines, Exxon Mobil has withdrawn from bidding on Galp Energia’s 40% stake in Namibia’s offshore Mopane oil discovery, estimated to contain at least 10 billion barrels of oil and gas worth over $10 billion. According to Reuters, over 12 oil companies, including Shell and Petrobras, had shown interest in the stake, though reasons for Exxon’s exit are unclear. Separately, oil and gas production in the Gulf of Mexico could face disruption unless the US National Marine Fisheries Service updates its endangered species protection regulation by December 20, following a court ruling. Without an update, the regulatory process to ensure oil and gas operations are carried out following the Endangered Species Act would become more cumbersome and complicated, potentially affecting production, as highlighted by the API. The Gulf currently produces 15% of the nation’s oil and employs over 400,000 people. At the time of writing, the Nov/Dec and Nov/May’24 Brent spreads are at $0.43/bbl and $1.16/bbl, respectively.
The naphtha market has witnessed remarkable strength on a crack basis into the new month, with the softness in naphtha offset by a weaker Brent futures complex in Northwestern Europe and Asian markets. For instance, while the Oct’24 NWE crack rallied from -$5.00/bbl a fortnight ago to -$3.25/bbl on 09 Sep (at the time of writing), the Oct/Nov’24 NWE naphtha spread weakened from $6.75/mt to $5/mt at the same time.
Nov’24 Brent futures flat price was volatile this afternoon, pricing at $71.68/bbl at 12:00 BST, with a high of $72.07/bbl at 12:53 BST and low of $70.68/bbl at 12:54 BST, before climbing to $71.94/bbl at 17:45 BST (time of writing). In the news today, tropical storm Francine has formed over the Gulf of Mexico and is set to hit the upper Texas and Louisiana coasts as a hurricane later this week. In response, Shell has paused drilling operations at its Perdido and Whale offshore platforms, both in the storm’s path according to Reuters. Exxon has also temporarily halted operations at the Hoover oil platform, offshore Texas. Meanwhile, the port of Freeport in Texas has decided to remain open to seaborne commercial traffic, on the condition that vessels report their movements. In other news, the ongoing shutdown of Libyan oil exports is propping up several light crude oil grades, including WTI Midland. European imports of WTI Midland have increased 24% m/m in August, reaching 1.43 mb/d. The US crude could replace lost volumes of Libyan crude in the short term, whilst Azeri and Algerian Saharan Blend will be refiners’ top choices for Libyan substitutes for October, according to Rystad Energy. Finally, Indian demand for oil products is down in August by 2.6% y/y as heavy rainfall has dampened diesel demand (-2.4% y/y). At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.45/bbl and $1.22/bbl, respectively.
The Nov’24 Brent futures contract capitulated over the past week as bearish sentiment mounted. Prices fell by over 5% to their lowest level this year, only finding support at the $71-72/bbl level. Traders shifted their focus towards economic concerns, with the expectations of the resumption of Libyan supply and poor Chinese demand weighing on sentiment. Not even OPEC+ delaying their production hikes could reverse the tide as it confirmed the worsening demand outlook. Although futures market positioning is at historically short levels, there could be further room for prices to fall as the $70/bbl psychological support level looms large.
Brent crude futures saw a significant sell-off last week amid a weakening economic backdrop despite OPEC’s plans to delay its production hikes. The Nov’24 contract has stabilised at the $72/bbl level as of 09:00 BST (time of writing). While we
Money managers retraced from last week’s bullish positioning to incredible bearishness in the week ending 03 Sep. We saw long-positioned managed-by-money players trim over 32.6mb from their combined positions in Brent and WTI futures (-8.27%) while their short-positioned counterparts added over 73.2mb (+49.27%) their shorts in the benchmark crude futures contracts. This change took the combined long:short ratio for the crude futures to 1.63:1.00 this week, below the 1st percentile for long:short ratios for every week since 2013.
The Nov’24 Brent futures contract has been quieter this morning, trading between $71.60/bbl and $71.90/bbl, but has since inched slightly lower to $71.50/bbl at 11:30 BST (time of writing).
