In addition to our regular Monday CFTC COT analysis report, Onyx Insight will publish its own in-house CFTC COT forecast ahead of the official Friday report. The model forecasts changes in long and short positions using machine learning, utilising Onyx’s proprietary data.
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.
Sentiment largely improved this fortnight in Asian LPG, with the Oct/Nov Far East (FEI) propane spread surging up from -$3/mt on 14 Aug to $1.50/mt on 27 Aug.
This morning, the October Brent Futures contract has seen a steep decline from highs of $79.70/bbl at 07:55 BST down to $78.35/bbl at the time of writing (11:30 BST). In headlines, an oil depot in the Russia’s southern Rostov region was set ablaze in a Ukrainian drone strike, a retaliatory response to the Russian assault on Ukrainian energy infrastructure this Monday.
It was a paradigm shift in the Brent/Dubai crude market as the orderly downtrend in Brent/Dubai gave way to a mighty rally on 26 August following Brent’s rally on the Libyan supply disruption news. The Sep’24 Brent/Dubai widened from $0.30/bbl to highs of $0.90/bbl. Nonetheless, the complex is entering September pricing on a strong note, with the Sep/Oct Brent/Dubai box suppressed below -$0.30/bbl. In contrast, outright prices in the deferred have returned to previous highs above $1/bbl.
Despite the vanishing trading volumes amid 26 Aug’s UK public holiday, the beginning of the week has been anything but quiet in Brent futures.
The international naphtha market continued to see shocking strength unfold. There has been decent buying in the NWE naphtha spreads, compared to the likely profit-taking flow in the East, although both markets have been quite quiet in the fortnight. Weaker crude was helpful for the cracks, although this has now been reversed with a stronger crude print. Petchem buying has supported both regions. Chinese funds selling the PX-MOPJ spread have supported the Asian naphtha as they sell this in anticipation of further economic issues. Petchem flow has been really important in supporting prices in the past two weeks. There was significant buying in the Euro Cal’25 crack by trade houses, likely for ethylene hedging, which drove prices up as the NWE propane complex continues to be extraordinarily strong. In the East, the Bal-Aug/Sep MOPJ also strengthened due to propane’s influence as players sold into the E/W and MOPJ spreads.
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.
Another week brings another selection of new trade ideas from Onyx Research, this time looking at trades in Dated Brent, Gasoil and Naphtha. 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 October Brent Futures contract saw a weaker morning, trading from $81.60/bbl down to a daily low of $80.59 before rallying back up to $80.95/bbl, where it trades at the time of writing (11:20 BST). In headlines, Russia launched approximately 200 missiles at Ukraine on Monday, targeting energy installations and causing power and water outages in Kyiv.
We expect Nov’24 Brent futures to end the week trading between $78/bbl and $82.00/bbl in what continues to be a range-bound market, albeit the range is likely to be slightly wider than in recent weeks. Given the excitement around the
The bullish sentiment in crude was short-lived as money managers reverted to getting shorter in the crude futures benchmarks in the week ending 20 August. Sentiment in crude futures has become increasingly bearish on a combination of factors. The geopolitical risk premium has evaporated as markets react to positive progress towards a ceasefire deal between Israel-Hamas, whilst assessing no imminent threat to oil production, transportation, and infrastructure in the region. China’s economic troubles have played a significant role, with both OPEC and the IEA revising down their global oil demand growth projections, citing the impact of a weakened economy on oil consumption.
Last week, Brent futures slipped in the first half of the week and the market priced in an Israel-Hamas ceasefire, which did not materialise. Prices were then supported as the Fed meeting in Jackson Hole some dovish hope into the market. Federal Reserve Chair Jerome Powell emphasised the need to support a strong labour market and acknowledged the unmistakable cooling in labour conditions.
Following a relatively quiet overnight session, the October Brent futures flat price spiked above $80/bbl on Monday morning, jumping by 70c in 20 minutes, trading at $80.50/bbl as of 11:20 BST (time of writing).
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.
