The Official Reports

November certainly didn’t disappoint for market excitement. Across commodities, fixed income, equities… Boy, it was quite the ride. But most of that was of course a product of the Trump reelection, which reverberated throughout financial markets globally. He’s back. The Trump has staged a dramatic return and struck gold, scoring a hat trick, winning everything on the table in the 5 November election. A Republican president, majority in the Senate, and now a majority in the House of Representatives too, gives the president-elect plenty of scope to act decisively. And he hasn’t hung about, declaring his desire to boost US crude production by an aggressive 3 mil b/d and to protect American industry by imposing stringent tariffs on imports. Inflationary consequences be damned! We’ll break out the popcorn and watch it all play out. Pandering from Canada and the EU, versus fighting talk from Mexico. Which will prove the better strategy?

What a November! Where do we start with the wrap up? Trump, of course. He resoundingly and against all kinds of odds, including a sniper taking bullet shots or the (in)Justice Department taking legal shots, got back on the commanding seat. And all the legal troubles just melted away, as if by magic. What a system! And now the man is in and moving at lightning speed. He has appointed loads of cabinet members with a nearly 100 pct hit ratio on the initial rounds. He is a man in a hurry and with a mission to fulfill.

Happy Thanksgiving, by the way, to our audience across the pond. There is much to be thankful for, big and small! And also, the same wishes to everyone globally. For those less fortunate, we ask you to think how you could help and also try to lessen anyone’s pain! Back to the market, flat price Brent was taken for a ride today, at least compared to the previous few days. Europe woke up and decided they wanted to buy Brent, with front-month Brent futures trading from a low of $72.39/bbl up to $73.49/bbl just before midday. The afternoon was a touch choppier on thin liquidity, as the US were out for Thanksgiving!

Just in time and ahead of the OPEC meeting to spice things up, The Officials bring you crude export data and implied production for the UAE, Oman and Qatar. And as they say back home, Ay Dios mio, so much cheating. The amounts are not small by the UAE, but as another Middle Eastern source said, ‘everybody cheating.’ A few hundred thousand barrels here and there, including Saudi Arabia. But the glaring overproducer, to use a kind word, is the UAE. We like to tell it straight, and some of our sources and friends were chuckling as we discussed that the UAE might get permission to increase its quote by 300 kb/d. Har, har, har, went the sources, as the UAE is about 1.0 mil b/d over the stated quota. But I guess all the OPEC members like to pretend. Why is it beyond any of us? We really don’t understand. This has been going on for some years, and I also asked why is an organization like the IEA or whoever not stating the real numbers. ‘Oh, they can’t bring themselves to say, we have been wrong for years,’ said a source that should know.

EIA inventories showed a 1.844 mil bbls draw in the week ending November 22, nothing right? Compared to a year ago inventories are down a massive 21.22 mil bbls, and the tanks at Cushing are looking particularly dry… one to keep an eye on. But the market yawns. The draw in crude was seemingly driven by a drop in imports, which fell by 1.886 mil bbls. Gasoline inventories increased by 3.314 mil bbls, but on a year-on-year basis, gasoline inventories are almost 6 mil bbls lower. In fact, national gasoline stocks remain close to the bottom of their 5-year range. RBOB futures flat price fell by almost 2c/bbl immediately after the release, pretty minor really. Other than that, the market said “I don’t care.”

Ceasefire begins in Lebanon! Israel and Hezbollah agreed to a 60-day truce after mediation from the US finally saw some progress. The US is hopeful this first step will calm tensions in the Middle East and pave the way to broader de-escalation and we hope it does too. The ceasefire began at 4 am local time, and it looks like both sides are taking the agreement seriously. We’re happy So far, no violations have been noted. As part of the ceasefire deal, Israel requires Hezbollah’s fighters to move out of southern Lebanon to lands above the Litani River. We hope the ceasefire can last and the US optimism is not misplaced. Netanyahu clarified, “With the United States’ full understanding, we maintain full freedom of military action.” Hopefully, this presents an opportunity for leaders to come to their senses and stop the wasteful bloodshed.

Ceasefire in Lebanon to be announced at 10 p.m., takes effect at 10 a.m., sources in Israel said. A glimmer of peace pierced with bombings but a step in the right direction. Crude prices were rangebound and choppy in the afternoon. Front-month Brent futures pierced the $74 level before rapidly retreating again to the comfy 73s safe space before a post-window sell off saw flat price drop down to almost the $72/bbl level. Currently, OPEC has pencilled in a 180kb/d increase in supply for January, but our sources expect a wimpy rollover and continuing vigorous cheating. The oil market, no surprises here will enter surplus next year. Any new OPEC production will go into inventories, contango here we come! And we all know what is going on behind closed doors in Abu Dhabi, Baghdad and Tehran, especially there. Just look at the fuel oil exports from Iraq. In 2023, they exported a record 14 million tonnes; this year, they are set to break 18 million tonnes. Never mind if the fuel oil was a little lighter and less refined than usual… We hear similar stories for spiked barrels out of other nearby areas. Mix in a little condensate, and it’s not crude oil anymore; it’s a whole new thing… and, therefore, excluded from the quotas. Guess where?

The window was once again a tight battle between buyers and sellers, but by the close of Asia, Unipec was once again the driver in the window, swatting away bids from Totsa and co, seeing the Dubai physical premium ease to 76c/bbl, down 6c from yesterday. There were even more convergences, too; in fact, we counted three more, meaning 42 total for the month. Exxon declared an Upper Zakum to Total, Trafi declared and Al Shaheen… also to Total. But Total weren’t the only buyers to converge today; PetroChina also converged with Reliance on an Upper Zakum. Things are clearly heating up for Upper Zakum, which has traded almost 60% of their exportable production. In total, across Al Shaheen, Oman and Upper Zakum almost 40% of exportable production has been traded in the window. That’s a huge chunk of the programme this month. Totsa alone account for 27% of total exportable production this month at 14.5 mil bbls, which as we discussed yesterday, will be ultimately landing in China.

$75 came and went. News that Netanyahu had agreed to a ceasefire with Hezbollah sent flat price tumbling towards the $73/bbl level after 13:30 GMT. Front-month Brent futures shed $1.53/bbl in the immediate aftermath. The erosion of Middle East geopolitical risk returns Brent flat price to the $73 handle, leaving the bearish fundamentals in control. And from the supply side, the outlook continues to look more bearish. Bessent’s nomination as Treasury Secretary means a lot of things, but crucially, it means more oil flowing out of the US. Get your raincoat, it’s going to rain, not water but oil. OPEC is breaking apart with more indications of the UAE at 3.85 mil b/d production. Who are they kidding with their pretend numbers? In fact, the new money bags man is looking to boost the US’s crude output by 3 mil b/d. If he sets the right conditions, yes, but don’t forget it is a free market there. Then we also got news today that Iran would not adhere to production quotas and would continue to chase its 4 mil b/d goal.

Netanyahu has just agreed to a ceasefire with Hezbollah! But the big news doesn’t stop there. Pay attention to China too! China has issued extra 8.04 million metric tons (around 160.8 thousand barrel per day) of extra crude import quotas to independent refiners for late 2024. This equates to close to 60 million bbls of extra crude imports!!! The rumor mill has been awash with indications that Totsa was buying crude in the window on behalf of Hengli, one of the independent refiners, AKA teapots. Hengli got an extra 14.5 mil bbls allocation so it makes sense. It would also make sense that somebody knew something in advance And Totsa has bought 13.5 million barrels so far this month in the window! We just put numbers together. Har har har

$75! We smelled it coming! It was one of those things when we actually felt the bullish signals telegraphed by the EIA inventories. And also note the upcoming burst of gasoline demand for Thanksgiving. We also heard today that companies had booked forward USG loadings into Europe. This in turn resulted in some companies selling the forward CFDs. It all sort of makes sense. The bulls were having fun. Well, it’s been another day of peaks and troughs. Europe woke up in a frenzy and wanted to try Brent for $75 but came up short and it took a second assault to break through the ceiling at 15:42 GMT. Before 18:00, markets cemented the move above the $75 handle.

Dubai was very strong today and physical gained an impressive $1.32/bbl to reach $74.15/bbl. Once again, the price was right for Europe and it bought Brent, and almost touched $75 by the Asian close. We said yesterday that $75 could be on the cards, and it’s been teasing us this morning. Brent futures closed at $74.77/bbl, $1.21/bbl up on the day. But then the choppiness we’re getting accustomed to in European trading came in and the upward march stalled and dropped back towards $74.30/bbl just after 09:00 GMT. Dubai’s strength saw Brent futures/Dubai partials drop to 62c, from 73c yesterday.

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.