The Official Reports

Up, up, up it went! Brent flat price surged through the European morning, blowing through the $74 handle before midday in London from below $73 at Europe’s open. Fears around big missiles and bomb threats produce massive market moves! $75 was tantalising, but Team America decided not today. A gradual, bumpy decline through the afternoon put Brent back below $74, and it closed the European session at $73.91/bbl. Dubai set the tone for the day and North Sea traders didn’t want to break the cagey mould. Shell raised its bid for a 12-16 Dec Midland to Dated +$1.70 but nobody was tempted, while Gunvor withdrew its 13-17 Dec and 21-25 Dec Midland offers at $2.50. Compared to their previous showings, Totsa went suddenly silent in the North Sea after barely bothering to show up in Dubai this morning. Maybe 19 Dubai convergences and 6 North Sea cargoes in November have given the French their fill. Alternatively, they could just be feeling the effects of a big old binge yesterday. Feeling a bit worse for wear, monsieur?

This morning, Brent flat price went higher, why? Was it a delayed EIA data reaction or better demand signals from Asia or just a market that has been tired of going down. We share that some of us, think we could $75.00/bbl. We also expect a much higher demand for gasoline during the Thanksgiving period amounting to 1.3 more trips than last year. And also more flying. We will verify the data in two more weeks. By 11:30 GMT, Brent surpassed $74, beyond yesterday’s peaks. WTI lagged slightly and struggled to break above its highs yesterday but it did exceed $70 again. The weekly EIA report was more bullish than first glance may have suggested. PADD3 crude stocks fell by 4 mb, a big 1.18 mb/d increase in imports and a 110 kb draw on distillate stocks. Forget gasoline now driving season is well in the rearview mirror and focus on distillates instead. Cushing is still bone dry and saw another 140 kb draw.

In the North Sea window today, Totsa just couldn’t help itself. Just one more… and again it’s Unipec facilitating, as in the Dubai window. France against China, hmm. We will watch! Totsa bought a 10-14 Dec Midland from the Chinese at Dated +$2.10. Exactly the same deal as they struck last night, to the date and to the cent. Unipec clearly knows how Totsa likes it! And, once again, Equinor is desperate to offload its Johan Sverdrup, offering a 1-3 Dec cargo at Dated -$2.75 after not getting any interest at Dated -$2.60 yesterday. Trafi also came in and bought a Forties from BP for 12-14 Dec at $1.15 over Dated.

Totsa, the European hungry man! He’s going to explode at this pace eating up PG barrels and also North Sea! It was “a one man show!” during the window, according to traders. What are they doing with all this stuff? Tea Pots, say our sources but there was even a rumour of a PG cargo going to Europe. ‘But we are over the winter demand hump, we are buying February to refine in March,’ said a Singapore-based trader. March is typically one of the low months in demand due to turnarounds.

Totsa just can’t get enough. The French grabbed three more cargoes in this afternoon’s North Sea window! And all that after accumulating 13 convergences in Dubai so far this month. There’s no sating the French appetite. In today’s North Sea window, Totsa took a 10-14 Dec Midland from Unipec at Dated +$2.10, a 9-11 Dec Forties from BP at $1.15 over Dated and put Equinor out of its misery, lifting an 11-13 Dec JS once the Norwegians had lowered it down to Dated -$2.35! Once that was lifted, Equinor immediately withdrew its 1-3 Dec and 6-8 Dec JS offers. By the way, the Johan Sverdrup field is still operating at only 2/3 capacity, and Equinor hasn’t a clue when it will be back to full operation. Totsa’s gluttony for crude meets Equinor’s desperation to get rid of it and makes for a match made in heaven.

Today was a cornucopia of convergences! 7 in fact! 3 more to Totsa, 3 to PetroChina and Equinor collecting the last one. Vitol’s strong showing on the sellside brought a convergence to Totsa, for an Oman, while the French also received Upper Zakums from Unipec and Exxon too. Totsa’s got 13 convergences already in November. Oh boy, they are hungry! Light work for a major with such a huge appetite! The waiter just can’t keep up, bringing platter after platter to the ravenous patron. Meanwhile, PetroChina collected three Upper Zakums, from compatriots Shenghong and Unipec, as well as Phillips. As the cherry on the convergence cake, Exxon declared an Al Shaheen to Equinor.

Panic stations! All production at Johan Sverdrup is offline due to smoky electrical wiring at an onshore power converter station, according to our call with their spokesperson. That makes for 755 kb/d of oil equivalent out of action. Equinor also stated it is too soon to say when the field will be back up and running. At least they pinky promised they were working on the issue. They certainly should be: according to our calculations, given today’s prices, that lost production will cost Equinor over $50 million per day. Brent flat price seized the opportunity to make a break for it and surged up beyond $73 through the afternoon. It held onto those gains through the Trafi-dominated window to end the European session at $73.15/bbl, just over a buck up from Friday. And all that just as Equinor proudly announced discovery of North Sea oil and gas deposits near the Troll field on Thursday.

The $3.6 billion Singapore oil fraud saga committed by O.K. Lim is playing out its last scenes. It’s curtains really as OK Lim is sentenced to 17.5 years in prison for committing the biggest trading fraud ever perpetrated in the island state. Naughty, naughty. For an 82-year-old, that’s effectively a life sentence in the most literal sense. The presiding judge gave no concession for Lim’s medical conditions and age and said that a “deterrent” sentence was justified and necessary. Fudging the numbers here and there to hide losses can come with a hefty price tag. Due to our experience in the oil market, we knew OK and his son and others in his management team fairly well. They seemed to have more money than the bankers and at some point, I published a list of the banks giving his company LCs. The banks and traders were surprised at the web of interlinks. We are also following the nickel fraud case where the fraudster ensnared some of the top folks in Singapore.

Markets are getting tired. The stock market is down and oil’s flirting down near the $71.00/bbl market. And the biggest shiny thing of all, lasting gold, is heading toward $2,500 an ounce. Where to find refuge? Well, where people are in conflict and sadly the Russians and Europeans are at it again with an Austrian court trying to punish Russia’s Gazprom. As Batman surely wants to tell Putin, Wham, Bam, Pow. But who is the poor victim? The European consumer, as Russia says, no gas for you! 😊 And prices rise over ten percent. Don’t go into a gun fight with a pocketknife, the baddies told me in Britain. This week’s been chaotic in flat price. Brent is keeping us alert with constant ducking and diving. Monday’s dump of over $2 put us deeply back into the low 70s and cast a shadow over the week. It still feels heavy. A plunge on Wednesday and a bumpy ride yesterday and today tell us the price yearns for a 60 handle. It’s a matter of time. Today’s final surge stalled at $72.30/bbl and Brent closed the European trading week at $72.14/bbl. A post-window dump had prices down to $71/bbl by 18:00 GMT.

It’s convergence week! Totsa just can’t get enough. It gained yet another four convergences today: an Upper Zakum from each of Exxon and PTT, an Al Shaheen from Trafi and an Oman from Phillips. At least we’ve finally broken free of the Upper Zakums and got some variety in the grades being declared. Totsa just hasn’t been able to restrain itself this month. Le rampaging Totsa Taureau threw down his cigarette and baguette and came to try to save the tumbling physical premium this week, bidding and lifting all over the place. Look at how many convergences it’s got! 10! That’s 5 million barrels. Enough to keep France going for days! But rumour has it they’re taking it East anyway…

Prices just can’t decide between up or down. So, they do both. Up, then back down again. It’s more fun that way. It keeps us guessing. Overall, though, the line of travel is clear. The downward plunge this afternoon was briefly interrupted by the EIA’s stocks report showing a chunky draw on gasoline stocks, but quickly regathered for another dive. The fall continued even after the close at $72.40/bbl, to quickly wipe out the daily settlement change, with some interest. Before 18:00 GMT we were troubling $72.

Oil demand over estimation by international bean and barrel counting organizations continues unabated. Yesterday it was OPEC’s turn to say China’s demand was growing by 450 kb/d, today it’s the IEA. Can anyone admit they got it wrong and make a large correction to account for China’s oil product consumption contraction? Well, it appears not. We are small and armed not only with conviction but also with data. As our wall says in our refurbished gigs, ‘without data, you are just another person with an opinion.’ China’s oil consumption has fallen out of bed and all our sources are reporting close to 1 million bbls contraction in gasoline and diesel. We feel so strongly about this we sent letters to major international organisations to alert them of the change which, by the way, didn’t happen overnight. We’re monitoring the reaction and holding our breath. Wish us luck. 😱

It’s breathless. Frantic. Prices are up, then down, then up. But prices are going nowhere. We briefly broke under the $71 floor this afternoon, but flat price quickly recovered. Lennie saw the rise in the European morning and was convinced a rally was on the cards. But then it tumbled again when Team America didn’t like such a high price tag but rose through the window. Lennie just can’t catch a break! After all that excitement, Brent closed the European session at $72.17/bbl once cent down from yesterday. OMG, we need to lie down.

The Convergence Day!  Two cargoes to PetroChina and two to Totsa. The signals were clear that PC would be a physical lifter and Totsa is always game. Buyers in Dubai’s window stubbornly refused to go higher than $71.15, or maybe they were afraid to get smacked and some did. Eventually, buyers went no higher than $71.14 on their bids and chomped on several offers at $71.15. A reinvigorated Totsa was a ravenous buyer, bullish again but hey, prices are a bit low, aren’t they. We think Totsa’s great at ‘doing the arb’ versus the INE Shanghai crude futures contract. Said instrument creates opportunity for those willing to deliver mid sour grades into the approved delivered tankage. So, buy Dubai grades in the window and deliver to China. Glencore came out as a buyer too. Exxon was the big seller and Reliance and Unipec joined in, among others.

Wishful thinking continues to run amok. All the grandees in the consulting and oil forecasting world are so wrong that it is not even funny, but yeah, we will chuckle. 😊 Nothing compares to sending people to the ground for them to sniff and report back. And yes, The Officials and Onyx personnel have been on the ground meeting Chinese companies in Beijing more recently and talking to oil folks and people on the ground. And an NOC employee almost joined us on the Beijing trip. DEMAND IS DOWN! Please folks, allocate some budget for the foreign travel into China, see it and detect the changes.