Brent crude futures have surged above the $80/bbl handle, reaching a 4-month high. Supply tightness concerns fuelled the rally as the outgoing Biden administration imposed a severe sanctions package on the Russian oil industry. This week, we expect price action
In the week ending 07 Jan, managed-by-money participants continued their bullish stride in Brent, adding 42.5mb to their long positions (+15%) while removing 0.8mb from their shorts (-0.9%) w/w. This change in positioning took the total net length in the benchmark crude futures complex to just shy of 238mb, its highest value since early May 2024. The managed-by-money long:short ratio climbed 16% w/w to 3.73:1.00, just under the 45th percentile for all weeks since 2013
The Mar’25 Brent futures contract gapped up on market open this week from $79.70/bbl to around $81.20/bbl where prices remained supported overnight. This morning, crude prices initially strengthened to $81.60/bbl at 0845 GMT, but since saw some weakness, trading at $81.00/bbl at 1050 GMT (time of writing). In the news today, following the latest round of US sanctions against Russia, Kremlin spokesman Dmitry Peskov stated that Russia will “configure the work of our companies in order to minimise” the consequences of these sanctions, with Russia’s oil and gas revenues having jumped 26% y/y in 2024 to $108 billion. In addition, Peskov acknowledged the potential for “certain destabilisation of international energy markets” as a result of these measures. In other news, an anonymous senior Indian government official said the country expects to receive Russian oil for the next two months with US-sanctioned tankers permitted to discharge crude until March, as per Reuters. Finally, crude oil imports into China saw a decline last year for the first time in nearly two decades excluding the pandemic, falling to 11.04mb/d (-1.9%) in 2024, according to data from the General Administration of Customs. Tepid economic growth and peaking fuel demand were among the factors for this decline, as per Reuters. At the time of writing, the Mar/Apr’25 and Mar/Sep’25 Brent futures spreads stand at $1.20/bbl and $5.19/bbl, respectively.
Strength in the Mar’25 Brent futures contract continued this afternoon, seeing a significant rally from around $78.80/bbl at 1100 GMT up to $80.65/bbl just after 1430 GMT, before falling back down to $79.25/bbl by 1750 GMT (time of writing). This afternoon saw bullish sentiment as crude oil prices reached $80 per barrel for the first time since October, coinciding with the US expanding its sanctions on Russia and Venezuela. The measures against Russia include sanctions on Gazprom Neft and Surgutneftegas, and the blacklisting of 183 vessels involved in Russian energy exports, according to Financial Times. Meanwhile, the sanctions on Venezuela targeted state oil company PDVSA chief Hector Obregon and eight Venezuelan officials in President Nicolas Maduro’s government, as per Reuters. These measures come alongside UK and EU sanctions aimed at fifteen additional Venezuelan officials. In other news, oil refiners in India and China have increased crude purchases from the Middle East and Atlantic Basin amid concerns of limited Russian and Iranian supply, according to Bloomberg. Two Indian refiners bought up to 6mb of Oman and Murban crude this week for February loading, while Indian Oil Corp bought up to 2mb of WTI Midland. Finally, US non-farm payrolls released at 1330 GMT today showed a 256k increase in jobs in December 2024, the highest in nine months and much larger than the forecast of 160k. At the time of writing, the Mar/Apr’25 and Mar/Sep’25 Brent futures spreads stand at $0.92/bbl and $3.97/bbl, respectively.
Ukraine has ended Russian gas transit to Europe as its 2019 agreement with Gazprom expired, marking a historic step in reducing Europe’s reliance on Russian energy, though it has led to power cuts in Moldova’s breakaway Transnistria region. While alternative energy sources are expected to mitigate the impact for most EU countries, Russia-friendly leaders in Slovakia and Hungary have criticized the decision amid rising costs.
The Mar’25 Brent futures contract has rallied this morning from $77.30/bbl at 0600 GMT up to $78.85/bbl at 1055 GMT (time of writing). Crude oil prices have seen bullish sentiment amid expectations of potential supply disruptions from US sanctions on Iran and Russia. In the news today, Nigeria’s Dangote refinery is building eight additional tanks to store imported oil, adding about 6.3mb of storage, as per Bloomberg. Domestic shipments of oil to Dangote rose to 358kb/d in December from 308kb/d in November, the highest since the plant opened, however, Dangote is looking to purchase more oil from abroad as local supplies remain low overall. In other news, Shell has started production at the Whale field in the Gulf of Mexico, with the project expected to hit peak production of around 100kb/d of oil equivalent, as per Reuters. Chevron, which owns a 40% stake in the field, said the Whale development would bring it closer to reaching a net 300kb/d of oil production in the Gulf of Mexico by 2026. Finally, Iraq is in negotiations with BP to develop several oil fields in Kirkuk, according to the Iraq Oil Report citing four senior Iraqi oil officials. An initial profit-sharing contract is expected to be finalised as soon as the end of January. At the time of writing, the Mar/Apr’25 and Mar/Sep’25 Brent futures spreads stand at $0.83/bbl and $3.51/bbl, respectively.
The Mar’25 Brent futures contract has seen steady support this afternoon, increasing from around $76.40/bbl at 1200 GMT up to $77.20/bbl at 1725 GMT (time of writing). In the news today, Saudi Arabia’s crude oil supply is set to decline in February m/m, with Saudi Aramco projected to ship about 43.5mb of crude oil to China, down from January’s 46mb. China’s state majors CNOOC and PetroChina are expected to lift less crude in February while Aramco is set to increase its supply to Sinopec and Sinochem, according to a Reuters report. In other news, after BP was hired as a technical service provider for India’s largest oifield, Mumbai High, the British major stated that crude oil output at the offshore field could be increased by 44% from a baseline production of 45.47 million metric tonnes to 65.41 over the ten-year contract period. According to India’s ONGC, the increase is expected to be visible from FY’26 with full scale visibility expected from FY’28. Finally, in the leadup to President-elect Trump’s inauguration on 20 January, the US Senate energy committee will hold nomination hearings for energy roles on Tuesday and Wednesday (14-15 Jan) next week, as per Reuters. The committee will hold a hearing for Doug Burgum for secretary of the interior and Chris Wright for energy secretary, two candidates who are both expected to carry out Trump’s policies to boost production of oil and gas. At the time of writing, the Mar/Apr’25 and Mar/Sep’25 Brent futures spreads stand at $0.67/bbl and $2.82/bbl, respectively.
It’s been an eventful first week back in the office. Donald Trump’s back at it, playing Monopoly with a globe in front of him, while here in the UK, electricity prices were gone (berserk) with the wind. Meanwhile, the Mar’25 Brent futures contract briefly hit levels recorded in October while the six-month spread climbed to its widest since August – a firm backwardation. We ended 2024 cautioning a dismal fundamental narrative in oil… so what changed? Our global oil balance still flags a bearish picture in 2025. As per the EIA, US gasoline and distillate fuel oil inventories recorded significant builds in the week ending 3 Jan. Additionally, despite China’s recently announced economic stimulus measures, the yield on China’s 10-year bonds fell to all-time lows, exacerbating worries of a deflationary spiral a la Japan. However, Cushing crude oil inventories have fallen to a decade-low level. Moreover, the US has doubled down on its sanctions on Russian and Iranian crude – which may pose problems for buyers in India and China, with Shandong also reportedly tightening its monitoring of US-sanctioned ships. Finally, the emergence of a winter storm in the US has buoyed heating oil and gas demand in the near term. We see no impact on infrastructure yet, although temperatures remain low in the East and South, including in critical regions like Chicago and the Gulf of Mexico (sorry, the Gulf of America).
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. Please note that the release of this week’s CFTC COT report has been delayed to Monday, 13 January.
Mar’25 Brent futures dropped overnight to a low of around $75.70/bbl at 0140 GMT before it was slightly more supported to $76.10/bbl at 1020 GMT (time of writing). Shell has deemed its oil discovery off Namibia’s coast commercially unviable, leading to a projected $400m (£325.52m) write-down, Reuters reports. This setback hinders Namibia’s hopes of becoming an oil producer, with Shell stating that resources in offshore block PEL39 “cannot currently be confirmed for commercial development.” Alaska is suing the Biden administration, claiming it violated a Trump-era law by limiting oil and gas drilling in the Arctic National Wildlife Refuge. The 2017 law required two lease sales by December 2024, but Alaska argues the administration’s recent 400,000-acre lease, announced with restrictions, fails to meet the mandate. Oil companies declined to bid in a US government auction for Arctic National Wildlife Refuge drilling rights, reflecting waning industry interest in the crude-rich but challenging region. The Interior Department reported no bids ahead of Friday’s unsealing, marking the second failed auction in 4 years. A 2021 sale under Trump drew just 11 bids, mostly from an Alaska development corporation. In Canada, Alberta’s oil production reached a record 4.197 mb/d in November, surpassing the previous high of 4.187 mb/d set in December 2023, according to the Alberta Energy Regulator. The front (Mar/Apr) and 6-month (Mar/Sep) Brent futures spreads are at $0.61/bbl and $2.56/bbl respectively.
After reaching nearly $77.90/bbl this morning, the Mar’25 Brent futures contract has weakened this afternoon, selling-off from $77.50/bbl around 1300 GMT down to $76.25/bbl at 1730 GMT (time of writing). Crude oil prices saw bearish sentiment alongside the release of EIA data at 1550 GMT today, which showed a lower-than-expected draw of 959kb in US crude oil inventories for the week ending 03 Jan, compared to a forecasted draw of 2mb. In the news today, the Ukrainian military said it set fire to a Russian oil depot which provided fuel to the Engels-2 military air base containing Russian nuclear bomber planes, as per Reuters. Meanwhile, a Russian regional governor Roman Busargin stated that a fire caused by a “mass drone attack” had broken out in Engels at an industrial site, which he did not name. In other news, India’s state-owned Oil and Natural Gas Corporation (ONGC) has hired BP to be the technical services provider at their Mumbai High oilfield, a move aimed at identifying improvements in the facilities to boost crude production. The oilfield hit a peak oil production of 471kb/d in March 1985, with output declining to around 134kb/d as of last year. Finally, strong European demand for Guyana’s crude has pushed the country’s oil exports up by 54% to 582kb/d in 2024, according to Reuters citing LSEG shipping data. Since Guyana began exporting oil in early 2020, it is now the fifth largest Latin American crude exporter after Brazil, Mexico, Venezuela, and Colombia. Finally, at the time of writing, the Mar/Apr’25 and Mar/Sep’25 Brent futures spreads stand at $0.62/bbl and $2.63/bbl, respectively.
The Mar’25 Brent futures flat price strengthened overnight from the $77/bbl level, reaching a high of $77.88/bbl at 08:38 GMT and is set to test the $78/bbl resistance level. Alongside expectations of further sanctions on Russia and hopes for a revival of Chinese demand, sentiment was boosted by a larger-than-expected draw in API crude inventories of 4.02mb. In the news, CNOOC said on Wednesday it was aware of its inclusion on a U.S. Defense Department list of companies linked to the Chinese military and would continue to follow up the move. Exxon expects a $700 million profit hit from lower oil prices and shrinking refining margins in Q4’24, signaling challenges for Big Oil amid global crude oversupply and Chinese economic concerns. Sinopec’s Zhenhai refinery reported a fire at its new 220kb/d CDU during commissioning, which was extinguished with no injuries. Iran is pressuring China to release $1.7 billion worth of oil stranded in Chinese ports since 2018 due to U.S. sanctions, as it faces mounting storage fees and urgency to sell the oil before former President Trump returns to power and potentially tightens sanctions further. Finally, the front (Mar/Apr) and 6-month (Mar/Sep) Brent futures spreads are at $0.70/bbl and $2.96/bbl respectively.
The bears had their turn over the festive period, and the Dated Brent bulls have entered 2025 fully locked in. Physical differentials climbed above $0/bbl on 06 Jan, and the direction and momentum of the physical will dictate the market sentiment in the coming weeks. The theme over the Christmas period was bearish, where the physical differential was pressured below $0/bbl. We saw two trade houses and a major offer the prompt weeks, which saw the 23-27 Dec, 30-03 Jan, and 6-10 Jan crater. In addition, a significant buyer had disappeared from the bid side, which was significant. However, the new year has brought in new themes.
The Mar’25 Brent futures contract strengthened above $77/bbl at noon GMT today, where it met resistance and softened to $76.70/bbl at 14:15 GMT. Since then, the benchmark crude futures contract has continued to oscillate between these ranges, seeing resistance at $77.15/bbl and support at $76.65/bbl, and stands at $76.95/bbl at 17:30 GMT (time of writing).
The Feb’25 RBOB futures contract saw support at the end of 2024 but began the new year softening from $2.07/gal on 03 Jan to $2.03/gal on 07 Jan (at the time of writing).
