Dated v Brent

The chasm between the reality of demand sentiment and the crude oil futures markets, by extension, and the continued relentless buying in the North Sea physical seems to have been driven even wider this fortnight. Oct’24 EFP continues to price relatively weakly on partials, pointing to a squeeze in the physical rather than genuine demand. Fundamentally, margins continue to struggle with product weakness, although the lower flat price lent a touch of support.

All hell broke loose this week as the Bears came in with a bang. The Dated Brent market was not immune to the chaos that ran amok global financial markets at large. The poor US jobs reading was the tinderbox that catalysed the worldwide sell-off, and a bloodbath ensued. For our readers outside of Japan, it is one less bowl of ramen or can of Strong Zero on your upcoming trip to the land of the rising sun as investors unwound their carry trades, prompting a mass exodus from the Nikkei.

What goes up, must come down, and it really feels like we have reached an inflection point in Dated Brent, or inflexion point as the Americans spell it. As usual, it is all eyes on America, and what the changing political tides will mean for the oil market, geopolitics, and the financial markets at large. But that is a discussion reserved for Q4. The Dated Brent market is all about the here and now, and that is what we will focus on.

Sentiment in Dated Brent remained hopeful in the week leading up to the August Brent futures expiry and sustained this strength for a few days following expiry, after which things cratered very quickly.

On 17 June, the world went to sleep with the physical differential still in sub-zero territory at -30c/bbl and woke to a whole new regime with the physical diff bid above 1c/bbl.

Despite this bearishness, the July DFL found some respite and rallied to above 20c/bbl on Jun 11th after previously being burned down to -50c/bbl on June 4th.

It seems like the North Sea crude market has begun to gasp for air after drowning in a very weak May.

The Dated market has been inundated with weakness. The volatility that we have been seeing in the physical diff has continued and the phys diff reached lows of almost -$1/bbl on May 14.

‘Strong Brent expiry to give bulls false hope’ or so the meme goes. Immediately following expiry, the North Sea market saw a dramatic capitulation as the physical turned offered.

After a prolonged bull play in the North Sea physical, Gunvor flipped to aggressively selling Midland and Forties cargoes into the new month

The buyside players in previous physical windows were notably absent in the cash on expiry day, showing that the bullish sentiment was just not it.

After a prolonged period of weakness following the first week of April, Dated structure staged a recovery from April 18 after finding the floor.

The resurgence of strength following a blip during expiry has allowed for the Dated market to enter February with strong buying in the face of a risk/reward skew previously thought bearish.