The Officials

Markets opened International Energy Week well down, still suffering with Friday’s hangover, as key participants prepare for a frantic week of conferences and boozy meetings in London But in Dubai it’s finally convergence o’clock!! On the 16th trading day of February, Chevron declared a cargo to PetroChina. We only had to wait until the final week of the month to get one, quite a change in pace from the prior few months. But you wait for a bus and three turn up at the same time. As well as Chevron’s convergence with PetroChina, Reliance declared an Upper Zakum to PetroChina and another of the same grade to Vitol.

The market jumped and dumped. From over $77 yesterday afternoon, flat price declined steadily early today throughout Asian trading and made it to lunchtime in London just above $76. And then Team America slam dunked it. Brent collapsed to below $75 and just about clawed its way above to close at $75.01/bbl! $75 has been a sticky level in recent weeks, so how well can flat price hold on this time?

The familiar faces of the regulars turned up again for another cortège in the Dubai window – Vitol and PetroChina kept on buying from the usual sellers, Reliance and Chevron. But there’s a new boy in town. Shell waltzed in and lifted a Chevron offer, the first time we’ve seen them in a while – but just one trade for now. Again, there were a few other bidders there or thereabouts, but the likes of Trafi and BP kept their bids below the market. Yet, we’ve reached the end of the third week of February and we’ve still not seen one single convergence in Dubai. Nobody wants to dive in and seize the market – don’t worry, guys, Totsa are all off skiing, they’re not going to massacre you again.

The Trump/Musk team want to audit Fort Knox to see if the gold reserves are really there. We’re waiting for the details on the visit while also wondering if Musk could come to London and audit the aptly named Loco London gold market. You see, we’ve been hearing about gold delivery problems in London while watching the price skyrocket towards the $3,000/troy ounce level. Maybe there is gold and maybe there isn’t. But one of delivery points, the mighty Bank of England is not delivery the gold speedily. Conspiracy theorists say there isn’t enough to cover all the obligations, while some people we know say only 15 employees are authorised to handle extraction from deep underground vaults using a rickety old lift.

The same players came out for some more fun in Dubai today. Chevron resumed its offering, though was less interested in hitting bids. That role was taken up by Reliance, which hit both Vitol and PetroChina with aplomb. Others were hanging out in the window but kept their distance from the action: Exxon’s bids were low, while Shenghong’s offers were high, so neither got stuck into the meat of the matter. Indeed, it’s still rather quiet, with only 4 trades today and STILL no convergence! We’re getting withdrawal symptoms after Totsa’s antics in the previous three months. What can we say, we miss them!

Brent fancied a run up the hill. It climbed and danced its way up throughout the morning, like the longs making the most of the rally, from the early Asian session right through to after lunchtime here in London, but it stalled and fell back slightly to the European close. By the end of the window, it had slid back down to $76.43/bbl, almost 40c down from its peak. It’s getting chilly out there in the US, so keep an eye on production shut ins – with North Dakota already expecting at least a 150 kb/d reduction. But Brent kept falling post-window, down below $76 by 18:00 GMT.

Who knew? Talking can resolve conflicts. The Russians said talks with the US had gone well and they had covered a wide array of issues. Rubio said the end of the Ukraine war must be acceptable to all – but does he just mean those who are present in Riyadh? As the wordsmiths and silver-tongued diplomats got busy charming and schmoozing, Brent cooled from its peak over $76 to fall back towards $75, soothed by Lavrov’s revelation there should be some moratorium on attacks on energy facilities in the conflict – too late for Kazakhstan . An afternoon recovery saw Brent close at $75.62/bbl.

The Officials Team is launching a Liquidity Report covering major futures markets and also key swap instruments. The Report contains average daily traded volumes for five working days periods and compares them with the previous five working days giving an indicator of liquidity flows into major instruments from week to week. You may consider this, as we do, as a momentum financial indicator into or out of an instrument. In addition, we also provide comparison with the previous year which gives an indication of a discrepancy year on year. These are indicators that are used to market practitioners.

Who knew? Talking can resolve conflicts. The Russians said talks with the US had gone well and they had covered a wide array of issues. Rubio said the end of the Ukraine war must be acceptable to all – but does he just mean those who are present in Riyadh? As the wordsmiths and silver-tongued diplomats got busy charming and schmoozing, Brent cooled from its peak over $76 to fall back towards $75, soothed by Lavrov’s revelation there should be some moratorium on attacks on energy facilities in the conflict – too late for Kazakhstan . An afternoon recovery saw Brent close at $75.62/bbl.

Rubio and Lavrov sitting across a table from each other, mediated by the Saudis – 30% of global oil production in one room! These are the really big players on the world stage, gathered to carve up the almost expired Ukraine. So sick it is in the infirmary attended by European doctors about to be judged not so good at their job. The US, who has guns, wants its money back and the Russians aren’t prepared to cede any territory they’ve seized. It’s been a 3-year slog, why would they?!
While the world is divided, anyone for $76? After the window closed at $75.18/bbl, Brent went on an adventure, clambering up beyond $76 by 10:45 GMT. Maybe those OPEC rumours are stickier than we thought or not everyone’s as optimistic as us about the prospect for peace in Ukraine – neither Lavrov nor Rubio looked especially happy during their meeting ☹.

The Riyadh meeting represents the three biggest oil producers in the world: US, Saudi Arabia and Russia, with an output of over 31 mil b/d! Around one third of total global oil production. Lavrov, Rubio and MBS are the big wigs drawing out new lines on the map and energy must be at the centre of this new world order. Zelenskyy is also apparently going to visit Saudi Arabia this week – we wonder whether the others will stick around to wait for him or if he’ll be Mr Lonely. He’s busy as he needs a new home. He is also going to visit Turkey tomorrow, according to Erdoğan’s office. Maybe the Turkey Riviera beckons him.

Trump wants rent (or get paid back) but Zelenski said no. We think he’s gone imminently. And UK Starmer is ready to send 25,000 troops to the Ukraine Starmer has to take the biscuit, He is offering to send a peacekeeping force to Ukraine, but it is not numerically possible. This costs loads of money and Reeves wants to hold defence spending at 2.3% of GDP for as long as possible. Starmer’s set to visit the White House next week, he’ll need to provide some grovelling form of
appeasement and Reeves might have to dig up $5-6 billion extra needed to raise that to 2.5%! Great use of tax money! Let’s be blunt here, NATO lost again and this means that an accommodation between Russia and the US will be ironed out in ‘Trump’s time’ as one of his envoys said. This means quick time in the Riyadh meeting. Note Switzerland was bypassed.

Europe has been cast off as JD Vance calls Europe’s leaders Kommisars and accused the politicians of ignoring the will of the people, cancelling elections, curtailing freedom of speech and incarcerating people for expressing their beliefs in a peaceful manner. He ruffled some of the grey-suited Europeans’ feathers with his barrage of criticism against Europe’s leadership. We hope the Munich Conference leads to a more lasting peace than the 1938 Agreement. Whatever Starmer says, insisting Ukraine’s momentum towards NATO is “irreversible”, it’s obvious Europe is relegated to the children’s table. They scream and shout for attention, but the grown-ups are busy talking among themselves. Scholz didn’t get a Valentine’s hug from Vance, who ignored him. ☹ Vance also told the Europeans to take care of themselves.

Peace is coming even if the old and feeble European empires are still resisting, in words because they have no swords. American realism is clashing with the old, wounded German, British and French egos, but if you have no money and no swords all that you can do is moan – and moan they will! America has realized that dumping material and money into Ukraine will turn out more financially disastrous that the $3 trillion consumed in Afghanistan.
If there’s any doubt of the outcome look at the markets; they have no emotion, they just react to conditions. TTF shed 18% in three working days and is now trading at €48.58/MWh. The German Dax index is up 3.7% in five days and 8% in a month; the economy likes peace even if Scholz doesn’t. The expiring German Chancellor won’t be seen by Vance in his own country at the Munich conference because, as an American official said; “We don’t need to see him, he won’t be chancellor long.” So true. Rollover Beethoven. 😊 And Macron, all he can do is take a stab with his mighty pen and write whatever in the FT about a response to the American ‘electroshock’. He also has no money and is on borrowed time. The war’s over.

The German stock market likes the developments, with the Dax up over 2% today to a record high! Losing has never felt so good. NATO chief, Rutte, insisted that Ukraine will be involved in any peace talks and, apparently, the Kremlin agreed that its foe should be involved “in one way or another”. European leaders also chirped up a chorus that they will not be ignored or disregarded. A show of force or more likely a lunge for some kind of relevance. Zelenskyy said Ukraine won’t accept any deals made between the US and Russia in its absence, like he has any option. Just make it end!