We said yesterday that the market really wanted to go up, regardless of fundamentals. Seems like bulls were too attached to Libya or to some fluffy nonsense as Libyans really need the money and so they’ll find a way to accommodate and keep the cash flowing. Remember technicals are noise but macros always win in the end and macros are super bearish – we say this with in situ reporting from China.
The gasoline market has seen pressure in the past two weeks. The summer driving season stalled on arrival, and Oct’24 RBOB flat price fell below $2/gal on 3 Sep alongside the crude sell-off and complete void of bullish intent in gasoline. There was a little strength in RBOB on 28 Aug as there was a 2.2mb draw compared to the 2.15mb draw expected; although RBBR was supported, there was physical selling in the backend of EBOB. The Oct’24 EBOB crack shows this lack of appeal of European gasoline right now as the open interest is around 2mb less than the 5-year average, although it is increasing.
For all the market chatter about a disappointing summer for crude oil (flat price) and refined products, Dated Brent certainly did not get the memo.
The November Brent futures capitulated on Tuesday afternoon following the US open, falling from the $76/bbl level to $74/bbl within an hour, where it found better support. Prices fell to their lowest levels in nearly 9 months and were trading at $74.04/bbl at the time of writing (17:30 BST). Libyan Central Banker Sadiq Al-Kabir said that there were strong indications that a deal would be made between rival governments that would resume oil output, and this headline was a bearish catalyst for this afternoon’s sell-off.
Dubai surged relative to Brent, closing the spread. China is widely seen as underperforming but the weak
picture as we enter the fall is not translating into softer Asian benchmarks. Dubai is the outperformer so far in
September. The prompt weakness in the Dubai we saw throughout the back end of August has been left in
dust after expiration. Vitol continued to bid and are seen as winning with Dubai physical premia rising to over
two bucks in the first two trading days of September.
The November Brent Futures contract has seen a weak morning, trading down from daily highs of around $77.53/bbl at 08:00 BST to $75.73/bbl at the time of writing (11:20 BST). In headlines, two tankers, the Panama-flagged Blue Lagoon I and the Saudi-flagged Amjad, were struck by attacks in the Red Sea, with the Houthis claiming responsibility only for the former, according to Reuters. Both tankers, which sustained no significant damage, were able to continue their routes, the Amjad has a capacity of up to 2 mb of crude, while the Blue Lagoon I can carry 1 mb. The US Central Command criticized the Houthis’ actions as destabilizing regional commerce and endangering maritime safety. This attack reflects a broader trend of the Houthis targeting vessels in the Bab al-Mandab strait since last November, initially focusing on Israeli and allied ships but expanding their targets. Meanwhile, Russia has reportedly complied with its OPEC+ oil production cut obligations as of August, Deputy Prime Minister Alexander Novak told Interfax, as the country aims to make up for overproduction in 1H’24 of around 500kbpd by the end of the year. Russia exceeded its OPEC+ quota by 67 kb/d in July, with the government attributing the excess output “to one-off problems with the supply schedule, while the levels in August and September should make amends for this.” At the time of writing, the Nov/Dec and Nov/May’25 Brent Futures spreads are at $0.62/bbl and $2.05/bbl, respectively.
Another week brings another selection of new trade ideas from Onyx Research, this time looking at trades in naphtha, LPG and crude oil. 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 $80/bbl Battleground – Front-month ICE Brent futures moved sideways during August, unable to break out of a circa $76-83/bbl range. Geopolitical swell-ups and weak economic news, raising concern over oil demand, notably out of China, took turns pushing the flat price, respectively, up and down. Neither driver got the upper hand to set Brent on a new trajectory, with Brent’s price generally reverting towards $80/bbl. Even as Jerome Powell…
Boom! Brent flat price blazed a trail back up from the meagre sub $79/bbl handle it had been holding since yesterday evening to bound up to the $80/bbl level with a huge jump through the afternoon. But almost as quickly as it rose up, it got smacked back down again by almost 90c. According to a trader Brent “basically gapped down on nothing” and was “just following spreads”. The longs who took their winnings beforehand will be feeling pretty pleased with their afternoons and get a cosy night’s sleep on a big pillow of bank notes.
Nov’24 Brent futures fl at price increased sharply this afternoon after a period of volatility, pricing at $76.80/bbl at 12:00 BSTand reaching $77.42/bbl at 17:50 BST (time of writing). In the news, Russian oil shipping costs to India are easing, attributedto build-up in Russia’s fl eet and general weakness in the freight market. For mid-September, the cost for a Russian tanker totransport 100,000 mt has dropped to $4.25-$4.5 million compared to $4.7-$4.9 million for the period July to August. In othernews, a Reuters survey showed that Saudi Arabia could reduce the price of its crude loading for Asia in October. Theirsignature crude grade, Arab Light, is expected to be priced $0.50 to $0.70/bbl lower than the September prices. The pricereduction comes as a result of weaker Dubai benchmark prices and decreasing refi nery margins across Asia. Finally, Libyahas declared force majeure on El-Feel oil fi eld, a legal clause allowing exports to be halted, amid a widening shutdown ofproduction across the country. The El-Feel fi eld in the southwest was pumping approximately 70 kb/d when in operation andthe nation’s total oil output has more than halved since last week. At the time of writing, the front month (Nov/Dec’24) andsix-month (Nov/May’25) Brent futures spreads are at $0.75/bbl and $2.38/bbl, respectively.
The Nov’24 Brent futures contract began strong last week, reaching $80.15/bbl on 26 Aug amid thin liquidity from players exiting for the bank holiday in the UK. This strength was also attributed to supply outages in Libya.
Boom! Brent flat price blazed a trail back up from the meagre sub $79/bbl handle it had been holding since yesterday evening to bound up to the $80/bbl level with a huge jump through the afternoon. But almost as quickly as it rose up, it got smacked back down again by almost 90c. According to a trader Brent “basically gapped down on nothing” and was “just following spreads”. The longs who took their winnings beforehand will be feeling pretty pleased with their afternoons and get a cosy night’s sleep on a big pillow of bank notes.
Money managers were more bullish in the crude futures benchmarks in the week ending 27 August. In both Brent and WTI futures we saw an addition of long positions and a liquidation of short positions. Bullish sentiment was boosted in crude futures as investors became more sanguine about economic growth prospects following Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, as he hinted towards the beginning of a rate easing cycle from the next meeting in September. Moreover, supply disruption concerns mounted as Libya’s eastern-based government announced the closure of all oil fields which halted production and exports.
Nov’24 Brent futures flat price showed volatility this morning, rallying from $76.37/bbl at 07:00 BST to $77.18/bbl at 10:15 BST, before steeply declining to $76.80/bbl at 11:00 BST (time of writing). In the news today, Guyana raised their 2024 GDP growth estimate to 42.3%, following a surge in oil production offshore in the Stabroek block. In other news, further data has been published showing the weakening of China’s economy. Chinese manufacturing PMI has declined to 49.1 from 49.4, the National Bureau of Statistics said on Saturday, with factory activity in contraction for the fourth month in a row. In light of this, economists at banks including UBS and J.P. Morgan expect China will not reach its growth target of 5% for 2024. Finally, the oil depot fire in Russia’s Rostov region has been extinguished, two weeks after Ukraine’s latest drone attack on Russian energy infrastructure. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.75/bbl and $2.38/bbl, respectively.
Show Me the Demand! The Nov’24 Brent futures contract was trading at around $77.05/bbl at 09:00 BST (time of writing), and we expect it to end the week trading between $75-78/bbl. Amid the varying factors impacting the benchmark crude futures,
