The Official Reports

Tasting menu turned food fight. There were more players than other December windows: BP, Mitsui and Gunvor all joined the familiar trio of Trafi, Totsa and Equinor today. Gunvor got stuck in, selling a 12-14 Jan Forties to Trafi at Dated +$0.55, while it was also offering Midland. Totsa didn’t want to be left out and bought a 10-14 Jan Midland from Equinor at $1.60 over Dated. Mitsui, for all its bidding for Ekofisk and Forties, went home empty handed. Although it was offering Forties, BP didn’t feel like Mitsui’s bids came up to standard, and the two went their separate ways.

It was another big day in the convergence stakes, with four more. You’d be forgiven for thinking Totsa had bagged another 2 mill bbls of crude, but you’d be mistaken. Glencore has been quietly plugging away in the Frenchman’s shadow and today was rewarded with an Upper Zakum cargo from Exxon. Exxon did declare another Upper Zakum and guess who it went to! Totsa, of course. So did other convergences for UZ from both PetroChina and BP – one from each. So, Totsa’s reached 13 convergences in Dubai so far this month. And now Dubai partials have overtaken Brent, gaining a 3c/bbl premium!

Totsa can’t stop, won’t stop. If it were anybody else, it would be noteworthy, but Totsa’s proclivity has set the standard very high. It would be more notable if Totsa were less active. We just wonder when (if) that day will come… As it is, it was back to bidding in the North Sea, looking for another Midland. And Johan Sverdrup too. The hungry Frenchman collected an 8-10 Jan Ekofisk at Dated +$1 from Equinor, the prolific seller of December so far. It also snatched a 12-16 Jan Midland at Dated +$1.60 from Gunvor. Of the massive 34 cargoes traded so far in December’s windows, Totsa has bought 18! Along with its 10 convergences in Dubai, that makes for 17.6 mil bbl across both windows, averaging out to 1.6 mil bbl per trading day!! On track to beat even their own massive haul last month?

Capitaine France is still going strong and has absolutely dominated the Dubai window so far in December. Of the 10 convergences we’ve seen so far this month, Totsa has grabbed all of them! It’s not fair, hoarding all the love from the sellers such as Exxon and Vitol, while the other buyers like Glencore and Mitsui are left out in the cold to fend for themselves . But we have to respect the grind of the most determined market participant. This also hasn’t stopped Totsa bagging its fair share of cargoes in the North Sea too, which has seen a grand total of 32 trades so far this month. Totsa collected 16 of those, by our counting. How long can they keep this up?? It’s been months and there’s no sign of flagging!

‘Higher, higher!’ Chanted the markets as Brent flat price touched $74.30/bbl this morning. But the market is indecisive and has a short attention span, so was quickly tumbling back to below $73.70 before rebuilding towards the mid-$74 range by 17:30 GMT. What we’ve learnt today is that the market is an unpredictable mistress, but flat price looks very happy in the lower half of the 70s for now. Volatility is up compared to recent record lows, so moves in either direction are likely to be aggressive and rapid. It may even mount an assault on the $75 handle within the next week, if Chinese buying keeps propping up demand sentiment or the troubled regions of the world boil over.

Chinese crude buying is back big time. Following the earlier fifth quota for 58 mil bbls, Saudi allocations also jumped by close to 10 million bbls! Fasten your seat belts, this baby is going for a ride! The previous Saudi Cyber Monday OSP price cut worked its magic and now everyone wants more Saudi crude! The 80c reduction brought the customers in mass and they asked for even bigger volumes than allocated. The Saudis got some love back from China and allocations were upped. But the UAE cut supplies to Asia! Saudi December allocations fell way down to 36.5 mil bbls, but they surged to 46 mil bbls for January. As usual, Rongsheng’s going to be rolling in it with the biggest allocation, 16 mil bbls, while Unipec and PetroChina also got allocation bumps. Shandong got an allocation, 2 mil bbls, the first since September. But some were disappointed and wanted more. Sources say Unipec asked for 14 mil bbls but only got 8 mil! That’s a big difference.💔 We also heard other physical barrels are moving; our sources say WAF is flowing and the overhang went down from 100+ mil bbls to around 70 mil bbls. So, things look bullish as they do when people buy more than they were.

The morning’s march towards the upper $73 range ran out of steam and quickly retraced much of the gain, falling back towards the mid-$73 range by mid-afternoon and then dumping firmly back into the $72 range! But then the headline that Israel was preparing to strike Iranian nuclear sites saw prices jump back up to near $73.80/bbl. According to one trader, “Wingy vol popped”. That’s trader speak for surging bets on volatility.

The holiday might be awkward in some households, none more so than in the uncomfortable marriage between Austria and then Russia. OMV and Gazprom have broken up. OMV terminated its natural gas supply contract due to “multiple fundamental breaches of contractual obligations by Gazprom Export”. The Austrian Chancellor accused Russia of attempting to blackmail Austria through its energy resources. In short, OMV was trying to claw back money and Russia stopped delivering gas. Yeah, contracted terminated 😊 never mind the people that need the gas

We’re back to convergence central. Vitol declared an Oman, Exxon declared an Upper Zakum and PetroChina declared a Dubai. You’ve got one chance to guess who they sent it to. Yep, every single one went to Totsa. Yet again it’s the French vacuum cleaner hoovering them up. Whatta lotta Totsa. Indeed, Totsa was all over it in the window, bidding incessantly. The French were also lifting offers from a great range of sellers – BP, Phillips, Exxon, Trafi… whoever they can find and give a battering. Equinor was among them, though it was much less enthusiastic than in its North Sea offering in the past couple of weeks. As far as we could see, no other buyers were tempted, facing of Totsa’s prolific aggression. That didn’t prevent the likes of Mercuria and Hengli bidding, even if they didn’t get a reward for their efforts. After Totsa’s goliath buying efforts, the Dubai physical premium jumped to 94c, the strongest we’ve seen since late October! Meanwhile, prices kept going up in Asian trading and Brent flat price troubled $74/bbl by 09:00 GMT. It closed the Asian session at $73.79/bbl.

Trafi is still hitting the buffet car and was after a range of Midlands. It bid for 23-27 Dec at $2.20 over Dated, Dated +$2.15 for 28 Dec-1 Jan, and also for 2-6 Jan. Equinor hit Trafi’s 2-6 Jan Midland bid when it rose to Dated +$2. Trafi also went for an Oseberg, which Equinor was offering. Equinor offered its 23-27 Dec Johan Sverdrup down to $1.30 under Dated but nobody wanted to pick it up. After the interest in Trolls yesterday, Equinor offered another today, which Totsa lifted at Dated +$1.90 for 30 Dec-1 Jan. Totsa was also happy to take a 7-9 Jan Ekofisk from the Norwegians at $1.20 over Dated.

We’ve got used to Asia selling and Europe buying. But today started the opposite to usual; Asia boosted prices to significantly retrace the slip late yesterday evening. Brent flat price reached as high as $72.75, briefly. But Europe came in and knocked it back down a peg towards $72.30. The Europeans had a slow start but by 09:00 they were up and swinging, sending flat price back up again! Back to almost $73 in half an hour. Flat price just can’t decide which way to go! But we
have to observed some strengthening on the back of positive Chinese oil import stats. Today’s Dubai window was cagey and many bids and offers went unanswered, being withdrawn after the window’s close. One aspect of the window trading we’re becoming accustomed to is seeing Exxon as the primary seller. Again, it was hitting bids whenever they came up high enough. Most trades were made up of sellers smacking buyers’ bids and buyers only managed to lift a few offers here and there. As ever, Totsa was chucking in plenty of bids and was joined by Glencore and Mercuria. BP also showed up bidding, like Hengli, though the latter couldn’t keep pace and didn’t pick up a partial.

The window was more dynamic than ever! December’s been pretty crazy but today they cranked it up another notch. Bids and offers were flying left, right and centre. Trafi and Totsa were bidding heavily, while Equinor was offering a plethora of grades for yet another session. The Norwegian major was still trying to shift a 22-26 Dec Sverdrup, offering it down to $1.30 under Dated, but found no taker even there. It had more luck with its Midland offering. Once again, Trafi was hungry for Midland and swept up Equinor’s offer of a 5-9 Jan Midland at Dated +$1.95 as soon as the Norwegians lowered that far. That wasn’t enough Midland for Trafi, which kept bidding, looking for a 1-5 Jan cargo at Dated +$2.00 and another 27-31 Dec for the same price. It threw in a bid for a 1-5 Jan Midland at $2 over Dated too.

Oil prices soften as parts of the world burn. It is a free for all fight where every party is trying to grab what they can. Human disaster. The Syrian situation appears to be spiralling. The power vacuum resulting from Assad’s fleeing has seen lunges for influence by numerous parties. Israeli troops have grabbed more of the disputed Golan Heights as Syrian soldiers abandoned their posts in the aftermath, and now Syrian security forces have said the Israelis are approaching Damascus itself. An Israeli military spokesperson has denied the entry into Syrian territory proper and said operations have remained within the buffer zone as a defensive manoeuvre. Other regional powers have condemned Israel’s alleged land grab, but they all have their own interests in the new order too.

Well that didn’t last long. A brief test of $71 ended when markets decided prices weren’t high enough and they quickly pierced the $72 handle, and the Americans kept the momentum going. Feb Brent closed over a dollar up, at $72.41/bbl. Back in the $72-75 comfort zone, as geopolitical risk comes back to the fore, never mind the bearish fundamentals. Last week’s pattern looks set to continue. Equinor is still selling heavily in the North Sea, offering cargoes across grades: Ekofisk, Troll, Oseberg, Johan Sverdrup and Midland were all on the menu today. Trafi was bidding for Midland and, once it had increased its bid to Dated +$2, Equinor made the most of it. That didn’t stop Trafi from continuing to bid for more of the same, raising a 27 Dec-1 Jan Midland to Dated +$2.05. Trafi also went in bidding for Troll and Ekofisk. Eni made an appearance, lifting a Midland from Equinor at $2.05 over Dated. Equinor has really been covering all bases and offering all sorts in December’s North Sea windows so far. Totsa was relatively quiet in this afternoon’s window, only bidding for three Midlands ranging from end-Dec to early-Jan at around Dated +$1.80, after its frantic bidding and buying last week.

As we expected, Saudi Arabia cut OSPs for Asia. They did the minimum we prophesised on Friday, cutting Light grade prices by 80c, while Medium and Heavy each received a 70c chop. Will that be enough to entice back Chinese buyers who had been going to the spot market and looking to other suppliers, such as West African producers in the past month. There could be more competition for China’s attention, however. As the Assad regime crumbles, Iran’s crude exports to its old Syrian ally are set to unwind. TankerTrackers spotted that a tanker set to deliver 750 kb of Iranian crude to Syria did a 180 turn in the Gulf of Suez. The cancellation of exports from Iran to Syria now that Iran’s pal Assad has been ousted will free up around 60 kb/d of crude, which will need a buyer from Iran’s reduced list of customers – more competition for the lacklustre Chinese demand?

THE RUSSIANS ARE BACK!! Watch out North Sea guys, they are coming and are hungry! In the window, Litasco picked up a Midland from Gunvor for 6-10 Jan at Dated +$1.95. Other than that, it was back to normal December service. After the caginess in yesterday’s window, the tantalising trio wasted no time in getting down to business today. No sooner had Equinor offered Forties than Trafi gobbled it up, earning itself a 4-6 Jan at Dated +$1.45. Trafi also got a Ekofisk for 30 Dec – 1 Jan at Dated +$1. Totsa was back with its old comrades, buying a 29 Dec-2 Jan Midland at $1.95 over Dated. Once Totsa had lifted the first Midland from Equinor, the mighty Vikings pulled back and withdrew their other Midland cargo. Evidently, they just wanted to get one off their hands. Totsa wasn’t satisfied with only one Midland, and also collected a 24-26 Dec Troll (a rare find in the window) at Dated +$2.25 and a 20-22 Dec Oseberg at Dated +$2.05, both from Equinor. Equinor was also offering its Johan Sverdrup again, but nobody could work up the interest to take that one off their hands. The North Sea trifecta has dominated the window this week and we’re wondering if they can keep it up deeper into December. BP’s been bullied out after its dip into the Sea yesterday This week we have seen 19 cargoes done, wow!