The Official Reports

Blimey! Brent’s surge into the European close burst up beyond the last few days’ levels to carry us firmly back into the $72/bbl range. The bears went too deep into enemy territory and now they have to pay up! The super-short market will be feeling the pinch from this afternoon and we’re sure some will be kicking themselves for jumping on the bandwagon of $60 Brent too early.

Nov Brent futures premium over Dubai partials has inverted in recent sessions, with Dubai, “oddly outperforming” according to one trader. Today Brent reclaimed some ground. Weak macros have failed to shake prompt strength out of Brent; front spread rose to 53c of backwardation. Consensus from APPEC was overwhelmingly negative, OPEC let a little air out of their ballooned demand forecast, and today the IEA revised down their demand forecast for 2024, it’s not a pretty picture. With very few trading months left for 2024 oil, where is the strength coming from?

The signals for emerging surplus are coming in. Everywhere you look the curve has flattened. From Dubai to the North Sea, benchmark grades are struggling to muster even the slightest backwardation. The flattening has been particularly acute in Brent. Yesterday time spreads down the curve dipped their toes into a bearish contango. At 76c, Dec/Dec spreads closed the weakest in over 3 years. Compared to three months ago structures are starkly different.

The signals for emerging surplus are coming in. Everywhere you look the curve has flattened. From Dubai to the North Sea, benchmark grades are struggling to muster even the slightest backwardation. The flattening has been particularly acute in Brent. Yesterday time spreads down the curve dipped their toes into a bearish contango. At 76c, Dec/Dec spreads closed the weakest in over 3 years. Compared to three months ago structures are starkly different.

Traders were hoping for a quiet day going into the weekend but instead they got a comatose or nearly dead oil
market. At 15:00 BST Nov Brent stood at a consolidated $73.40/bbl, slightly above its level at yesterday’s close.
Then, however, markets went into freefall. Within the hour, Brent had toppled down by almost $2/bbl, to around
$71.50/bbl. Disastrous Canadian PMIs? Americans selling off? Or just the dour macros weighing down
everyone’s souls? And then in come the Saudis, slashing their monthly OSPs across the board for October
against the preceding month’s differentials. All grades into the Med and Northwest Europe received 80c cuts. In Asia, Arab Light and Medium took a 70c and 80c hits respectively, while Heavy was slapped with a full $1 cut.

Traders were hoping for a quiet day going into the weekend but instead they got a comatose or nearly dead oil
market. At 15:00 BST Nov Brent stood at a consolidated $73.40/bbl, slightly above its level at yesterday’s close.
Then, however, markets went into freefall. Within the hour, Brent had toppled down by almost $2/bbl, to around
$71.50/bbl. Disastrous Canadian PMIs? Americans selling off? Or just the dour macros weighing down
everyone’s souls? And then in come the Saudis, slashing their monthly OSPs across the board for October
against the preceding month’s differentials. All grades into the Med and Northwest Europe received 80c cuts. In Asia, Arab Light and Medium took a 70c and 80c hits respectively, while Heavy was slapped with a full $1 cut.

Traders were hoping for a quiet day going into the weekend but instead they got a comatose or nearly dead oil
market. At 15:00 BST Nov Brent stood at a consolidated $73.40/bbl, slightly above its level at yesterday’s close.
Then, however, markets went into freefall. Within the hour, Brent had toppled down by almost $2/bbl, to around
$71.50/bbl. Disastrous Canadian PMIs? Americans selling off? Or just the dour macros weighing down
everyone’s souls? And then in come the Saudis, slashing their monthly OSPs across the board for October
against the preceding month’s differentials. All grades into the Med and Northwest Europe received 80c cuts. In Asia, Arab Light and Medium took a 70c and 80c hits respectively, while Heavy was slapped with a full $1 cut.

Traders were hoping for a quiet day going into the weekend but instead they got a comatose or nearly dead oil
market. At 15:00 BST Nov Brent stood at a consolidated $73.40/bbl, slightly above its level at yesterday’s close.
Then, however, markets went into freefall. Within the hour, Brent had toppled down by almost $2/bbl, to around
$71.50/bbl. Disastrous Canadian PMIs? Americans selling off? Or just the dour macros weighing down
everyone’s souls? And then in come the Saudis, slashing their monthly OSPs across the board for October
against the preceding month’s differentials. All grades into the Med and Northwest Europe received 80c cuts. In Asia, Arab Light and Medium took a 70c and 80c hits respectively, while Heavy was slapped with a full $1 cut.

Traders were hoping for a quiet day going into the weekend but instead they got a comatose or nearly dead oil
market. At 15:00 BST Nov Brent stood at a consolidated $73.40/bbl, slightly above its level at yesterday’s close.
Then, however, markets went into freefall. Within the hour, Brent had toppled down by almost $2/bbl, to around
$71.50/bbl. Disastrous Canadian PMIs? Americans selling off? Or just the dour macros weighing down
everyone’s souls? And then in come the Saudis, slashing their monthly OSPs across the board for October
against the preceding month’s differentials. All grades into the Med and Northwest Europe received 80c cuts. In Asia, Arab Light and Medium took a 70c and 80c hits respectively, while Heavy was slapped with a full $1 cut.

Ennui is such a good word to describe the feeling sparked by the dated Brent market. Finally, things start to calm down and go into a reasonable direction where weakness or strength is reflected across all instruments. Equinor continues to increase the profile of Johan Sverdrup like they have bigger plans for the crude stream and sold a cargo loading Oct 1-3 to BP at Dated flat. A boring price but we like boring.

Ennui is such a good word to describe the feeling sparked by the dated Brent market. Finally, things start to calm down and go into a reasonable direction where weakness or strength is reflected across all instruments. Equinor continues to increase the profile of Johan Sverdrup like they have bigger plans for the crude stream and sold a cargo loading Oct 1-3 to BP at Dated flat. A boring price but we like boring.

Dubai’s physical premium has averaged $2.01/bbl so far in September, compared to the 90c in the full month of August. On a flat price basis, the market flatlined today. There’s still a lot of danger for the longs if the right noises are not made by OPEC and friends. OPEC’s life support isn’t working, with Dubai partials gaining 2c and front-month Brent futures losing the same, down at near 14-month lows. Despite some chaotic news announcements about OPEC quotas, Kennie and other long trades have never woken up from their comatose state.

Bad macros finally killed those with narrow focus on supply disruption stories in the face of continuing
loadings and also those believing fantastic stories of demand growth in the 2 mil bbl range.
Hello, wake up everybody; the world economy is soft and you know it, you read it everyday, you see it, you
feel it. You just want to believe your own story or that being fed by producers. What do you expect? That a
producer or group of producers, or long traders are going to tell you the demand growth isn’t there?

Dubai’s surge relative to Brent marches onward. Dubai partials minus front month Brent futures inverted,
going positive for the first time since 10 July, at 9c by the close of Asia today, while on a physical premium
basis, Dubai remains elevated at 2 bucks. While Brent futures spreads and CFDs get hammered in Europe,
Dubai’s prompt structure remains strong, and Dubai continues to outperform. The window was quiet, and
traders were tentative following the overall downward flat price correction. But Vitol and Mets still picked up
some partials from PC and Exxon. Anybody with a sense of end-user demand should sell, of course.

We said yesterday that the market really wanted to go up, regardless of fundamentals. Seems like bulls were too attached to Libya or to some fluffy nonsense as Libyans really need the money and so they’ll find a way to accommodate and keep the cash flowing. Remember technicals are noise but macros always win in the end and macros are super bearish – we say this with in situ reporting from China.