Distillates

The Nov’24 Brent futures contract recorded a weaker afternoon ahead of Oct’24 Brent’s expiry today. The Nov’24 flat price dropped from $79/bbl at noon to $76.70/bbl at 15:00 BST. Prices found more support here and firmed up to $77.25/bbl at 17:25 BST (time of writing). OPEC+ is reportedly set to proceed with their planned increase in oil output from October, multiple sources from the producer group told Reuters. The plan includes an output boost of 180kb/d in October by eight OPEC+ members and is part of a larger plan to begin unwinding their recent layer of output cuts equalling 2.2mb/d while keeping other cuts in place until the end of 2025. In other news, a poll of 37 analysts and economists surveyed by Reuters over the past fortnight forecast that Brent futures would average $82.86/bbl in 2024 – recording a fourth cut in Reuters’ estimates (July: $83.66/bbl). In macroeconomic news, US consumer spending increased 0.5% in July’24 (prev: 0.3%) while the PCE, the Fed’s preferred measure of inflation, increased by 0.2% in July’24 (June: 0.2%), up 2.5% y/y. Finally, at the time of writing, the Nov/Dec’24 and Nov/May’25 Brent futures spreads stood at $0.80/bbl and $2.45/bbl, respectively.

Nov’24 Brent futures flat price rallied this afternoon, increasing from $77.72/bbl at 12:00 BST to a high of $79.55/bbl at 15:00 BST before coming to rest around $78.47/bbl at 17:45 BST (time of writing). In the news, Typhoon Shanshan hit Japan’s southwestern island of Kyushu, with three people reported dead and one missing, according to Bloomberg. The storm hit the city of Kagoshima at top speeds of 123mph and is heading towards the main island of Honshu, where the major port of Mizushima and multiple oil refineries are located. In other news, US Q2’24 GDP was revised up to 3% y/y, primarily driven by consumer spending. At the same time, US weekly jobless claims fell by 2,000 to 231,000 in the week ending 24 Aug against a Reuters poll forecasting 232,000 claims for this week. Lastly, Iraq plans to cut oil output to 3.85-3.9mb/d in September 2024, and cancelled a spot cargo of 1mb in August to reduce exports, a source told Reuters. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.82/bbl and $2.63/bbl respectively.

This afternoon, Nov’24 Brent futures flat price showed upward movement from $77.30/bbl at 12:00 BST to $77.90/bbl at 17:00 BST (time of writing). During this time, prices were volatile with a rally to $78.16/bbl, a marked decline to $77.36/bbl at 15:30 BST before climbing to a high of $78.49/bbl at 16:07 BST. After the release of EIA stats today at 15:30 BST, Oct WTI prices reacted positively, showing upward movement from $74.52/bbl to $75/bbl at 17:00 BST. Libyan oil output has now dropped to less than 600 kb/d after producing an average of 1.2mb for the past year, following a series of oilfield closures by the eastern government this month. According to Bloomberg, this production cut is a response to the Tripoli-based government’s attempt to replace the central bank’s leadership. With Libya exporting around 85% of its oil barrels to Europe in recent years, it is likely European refiners will turn to the U.S. and West Africa to replace the Libyan light sweet crude. In other news, the Rhine river’s falling water levels are severely restricting the cargo limits for barges heading to inland Europe, Bloomberg said. Water levels on the Rhine have dropped periodically in recent years, with the water level at Kaub expected to be as low as 108cm by Sep. 1. As a result, a barge which can normally haul as much as 2.5k mt of middle distillates is restricted to loading 1.36k mt if heading past Kaub. This could drop as low as 1.2k mt. Finally, the Nov/Dec and 6-month Nov/May Brent futures spreads are at $0.79/bbl and $2.60/bbl respectively.

The October Brent futures flat price suffered a setback on Tuesday afternoon as its sell-off accelerated following the US open. Price action fell from the $81/bbl level at 12:00 BST to lows of $79.63/bbl by 17:25 BST (time of writing). In line with this, Brent spreads weakened significantly, with Oct/Nov falling from $1.10/bbl to $0.90/bbl over the same time frame.

The October Brent futures flat price rallied into Friday afternoon, climbing by $1 from $78/bbl to the $79/bbl level by 17:00 BST (time of writing). Markets were buoyed by Fed Chair Jerome Powell’s comments, where he stated that “the time has come for policy to adjust”, which was interpreted as a dovish signal. However, the question remains about the amount of the cut (25bps or 50bps), and the upcoming non-farm payrolls report on 7 September may change the calculus. BP has acquired a stake in a Chinese sustainable jet fuel company (Zhejiang Jiaao Enprotech Stock Co.) for 350 million yuan ($49 million). China’s Rongsheng has purchased an Aframax-sized cargo of Canada’s Kearl Lake Blend crude, which is being transported via the TMX pipeline. The crude grade is set to arrive in China for the first time since 2018. Finally, the front (Oct/Nov) and 6-month (Oct/Apr) Brent futures spreads are at $0.85/bbl and $2.84/bbl respectively.

The Oct’24 Brent futures contract traded around a range of $76.20/bbl and $76.50/bbl between 13:00 BST and 14:45 BST before strengthening further into the afternoon, firming up to $77.55/bbl as of 17:10 BST (time of writing).

Oct’24 Brent futures flat price has seen pressure this afternoon, from over $77.70/bbl at 14.00 BST to $76.30/bbl at 17.30 BST (time of writing). The EIA US inventory report revealed a 4.649mb draw in crude stocks compared to the 2.2mb forecast and a 560kb draw in stocks at Cushing, OK. Gasoline saw a draw of 1.606mb. This is less than the 1.8mb forecast, although PADD 1B saw a 1.825mb draw. Distillates saw a larger than forecast draw of 3.312mb, a 2.312mb higher draw than forecast. Refinery utilisation has seen a second consecutive week increase more than predicted, as it rose by 0.8%. The US economy created 818,000 fewer jobs than initially reported in the 12 months to March 2024, according to the Labor Department. This 30% downward revision highlights a weaker labour market. The biggest adjustment was in professional and business services, with 358,000 fewer jobs than first estimated. OPEC+ has limited room to increase output without risking lower prices due to rising supply from the US, Brazil, and Guyana, according to BP’s Chief Economist. If OPEC+ restores output in October, global oil markets could shift from a deficit to a surplus, per IEA data. The Oct/Nov and Oct/Apr’25 Brent spreads are at $0.58/bbl and $2.10/bbl, respectively.

The October Brent Futures contract experienced a mixed afternoon, trading sideways initially between $77.50/bbl and $77.85/bbl before rallying up to $78.30/bbl around 15:00 BST and experiencing a strong correction downwards to trade at $77.30/bbl at the time of writing (17:30 BST).