The Officials

For the week ending 28 March, our momentum table shows most contracts seeing slight to moderate growth in exchange traded volumes for June and July tenors, except for gasoil contracts which declined by 13% and 20% respectively. For the May tenor, most contracts saw small changes or declines, while May Brent fell steeply by 29.69% and RBOB rose by 9%.

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What a difference the rumblings of war can do. For Brent, March was a month divided in two. In the first sessions, it tumbled to below $69, going all the way down to $68.50/bbl on 5 March. The drop was caused by poor economics as some countries could see a severe contraction in the growth rate. But then the price turned back and built steadily into the low $70s before last week’s rally to $74. The US was beating on the Houthis and the rumours were on that Trump would drop bombs like never seen on the Iranians.

While equities were getting hammered (see more in the detail), dated was on a tear! The April DFL rallied up to $1.58/bbl from just under a dollar before the move this morning. Traders noted mega short covering, “mental buying” said one trader. CFDs strengthened too with the 22-25 April contract jumping to $1.28/bbl, and the 31 March – 4 April contract rose to $2/bbl!

In March, markets once again found themselves being pulled to-and-fro as international trade developments, geopolitical tensions, and window shenanigans continued to challenge traders. Even Gunvor are pretty “risk off at the moment” according to discussion at the Ft Commodities Summit last week.

Bonjour to Zelenskyy, who received considerable validation from a slew of European leaders in Paris, emphasizing that now is “not the time” to begin lifting sanctions on Russia. UK Prime Minister Keir Starmer stated that the group aims to increase sanctions to “support the US initiative to bring Russia to the table through further pressure.” What is the US initiative? The US definitely wants a ceasefire that lasts longer than a business day, and it wants to achieve this without Europe. However, if Russia desires access to SWIFT (as per its latest demand), the US may have to collaborate more closely with the EU.
But based on direct discussions with various seniors in Switzerland the Europeans are still seeing a red mist and willing to let their industries die. But those who lead industries are so so ready to buy gas and forgive all. Note what the CEO of Total said yesterday about opening up but he is not the only one, he is just one willing to speak publicly.

After a well-behaved trading session yesterday, PC and ADNOC crossed paths in the Dubai market and inverted the market again! Clearly nobody cares about an orderly market. Anybody who cares about things working properly awake anywhere or distorting in markets is an acceptable practice in key oil markets? ADNOC placed a bid at $74.80 immediately after PC offered at $74.75. Meanwhile, the Dubai physical premium hit its March high of $1.70… only to trip and fall 20c today to $1.50. And bam, they crossed again! A major told The Officials, “Ridiculous, how a producer bids and does not trade for the grade they produce and makes up the OSP”.

Brent futures soared to above $74 in a sudden afternoon rally, hitting $74.16/bbl at 15:51 GMT like a market jolted awake, then declined back to $73.92/bbl by close. The trigger? A Black Sea ceasefire announcement that lasted about as long as a Snapchat story.
After three days of tough negotiations in Saudi Arabia, Russia and Ukraine agreed to a naval ceasefire in the Black Sea – or so the US thought. Within hours of the US announcing this agreement, the Kremlin said it would only commit to doing so once sanctions on several Russian banks were lifted. These demands include a restoration of the state agricultural bank Rosselkhozbank’s access to Swift, which would require EU approval….oh boy, will this get dragged on.

The children didn’t misbehave! Chats in Lausanne with various market sources raised the issue of disorderly markets. There is an inherent duty when operating a marketplace, more so if it is regulated by IOSCO, to have proper systems in place and market order is a key requirement.

As of the week ending 21 March, our momentum table shows Brent contracts seeing declines in exchange traded volumes for the May tenor, but strong growth in June and July tenors. The gasoil, heating oil and RBOB contracts saw either decreases or only marginal increases, while WTI saw the largest declines across tenors.

Big news out of Riyadh! The US announced that both Russia and Ukraine agreed to a truce in the Black Sea and ‘will try their very best’ to avoid attacking each other’s energy infrastructure. Pinky promise! Bears are omnivores and enjoy carrots too, and the Kremlin would be well advised to take sanctions relief where they can get it. To this end, the US stated it would restore Russia’s access to global agricultural and fertiliser markets, while the Kremlin emphasised the need for sanctions relief on banks and companies involved in the food trade. It only took them several days to come up with this! The road to peace is a piecemeal one, pun intended, but welcome nonetheless. As Uncle Sam might put it to Putin and Zelenskyy, I want you guys to stop fighting! And the market reacted swiftly to the news! Brent futures surged to above $73.50/bbl in the morning before slumping in the afternoon by about $1 to close at $72.76/bbl.

Once again in the Dubai window, ADNOC and PetroChina crossed in ways that defy market logic! ADNOC was bidding $74.67 while PetroChina hit Vitol’s bids at $74.65. And by the way for anyone here, these crosses not only mess up the physical cost to billions of consumers and large producers BUT also affect the values of the balmos. All the derivative pricing is unclear. This has not been a one off but the bid/offer crosses are distorting the balmos since March 7th. This is unprecedented!

Venezuela is in trouble! In a move he dramatically called “Liberation Day in America,” Trump slapped a 25% “secondary tariff” on any country buying Venezuelan oil and gas. He accused Venezuela of “purposefully and deceitfully” sending to the US “tens of thousands of high level, and other, criminals”. Never mind that Venezuela just agreed to resume U.S. deportation flights, with 199 people deported from the US landed in Venezuela today.

Shenanigans with one of the world’s benchmarks continue with PetroChina and ADNOC seemingly intent on destroying the reliability of the Dubai index. How can the number be trusted to be used as a benchmark to power the Saudi OSPs, Kuwait, and other Gulf producers when sellers offer Dubai below where buyers bid for Dubai? How can an inversion happen? You tell me, but this thing is broken and for it to break, one could question how in charge is the host of the wagering establishment. This mechanism is too important for no one to be in charge to ensure best market practices.

The same faces rolled into the North Sea window again! Exxon and Shell have been playing ‘will they won’t they’ for several sessions and finally they got down to it! Exxon lifted Shell’s offer for a 2-4 Apr FOB Forties at Dated +$0.25, whereupon Shell immediately withdrew its other Forties offering. Again, Exxon wasn’t picky about the freight situation and was also bidding for a CIF Forties, which Shell was happy to offer too. Shell also tried to tempt the Americans with a Midland, but Exxon knew what it wanted today and only pursued the Forties.