The Official Reports

Ceasefire in Lebanon to be announced at 10 p.m., takes effect at 10 a.m., sources in Israel said. A glimmer of peace pierced with bombings but a step in the right direction. Crude prices were rangebound and choppy in the afternoon. Front-month Brent futures pierced the $74 level before rapidly retreating again to the comfy 73s safe space before a post-window sell off saw flat price drop down to almost the $72/bbl level. Currently, OPEC has pencilled in a 180kb/d increase in supply for January, but our sources expect a wimpy rollover and continuing vigorous cheating. The oil market, no surprises here will enter surplus next year. Any new OPEC production will go into inventories, contango here we come! And we all know what is going on behind closed doors in Abu Dhabi, Baghdad and Tehran, especially there. Just look at the fuel oil exports from Iraq. In 2023, they exported a record 14 million tonnes; this year, they are set to break 18 million tonnes. Never mind if the fuel oil was a little lighter and less refined than usual… We hear similar stories for spiked barrels out of other nearby areas. Mix in a little condensate, and it’s not crude oil anymore; it’s a whole new thing… and, therefore, excluded from the quotas. Guess where?

The window was once again a tight battle between buyers and sellers, but by the close of Asia, Unipec was once again the driver in the window, swatting away bids from Totsa and co, seeing the Dubai physical premium ease to 76c/bbl, down 6c from yesterday. There were even more convergences, too; in fact, we counted three more, meaning 42 total for the month. Exxon declared an Upper Zakum to Total, Trafi declared and Al Shaheen… also to Total. But Total weren’t the only buyers to converge today; PetroChina also converged with Reliance on an Upper Zakum. Things are clearly heating up for Upper Zakum, which has traded almost 60% of their exportable production. In total, across Al Shaheen, Oman and Upper Zakum almost 40% of exportable production has been traded in the window. That’s a huge chunk of the programme this month. Totsa alone account for 27% of total exportable production this month at 14.5 mil bbls, which as we discussed yesterday, will be ultimately landing in China.

$75 came and went. News that Netanyahu had agreed to a ceasefire with Hezbollah sent flat price tumbling towards the $73/bbl level after 13:30 GMT. Front-month Brent futures shed $1.53/bbl in the immediate aftermath. The erosion of Middle East geopolitical risk returns Brent flat price to the $73 handle, leaving the bearish fundamentals in control. And from the supply side, the outlook continues to look more bearish. Bessent’s nomination as Treasury Secretary means a lot of things, but crucially, it means more oil flowing out of the US. Get your raincoat, it’s going to rain, not water but oil. OPEC is breaking apart with more indications of the UAE at 3.85 mil b/d production. Who are they kidding with their pretend numbers? In fact, the new money bags man is looking to boost the US’s crude output by 3 mil b/d. If he sets the right conditions, yes, but don’t forget it is a free market there. Then we also got news today that Iran would not adhere to production quotas and would continue to chase its 4 mil b/d goal.

Netanyahu has just agreed to a ceasefire with Hezbollah! But the big news doesn’t stop there. Pay attention to China too! China has issued extra 8.04 million metric tons (around 160.8 thousand barrel per day) of extra crude import quotas to independent refiners for late 2024. This equates to close to 60 million bbls of extra crude imports!!! The rumor mill has been awash with indications that Totsa was buying crude in the window on behalf of Hengli, one of the independent refiners, AKA teapots. Hengli got an extra 14.5 mil bbls allocation so it makes sense. It would also make sense that somebody knew something in advance And Totsa has bought 13.5 million barrels so far this month in the window! We just put numbers together. Har har har

$75! We smelled it coming! It was one of those things when we actually felt the bullish signals telegraphed by the EIA inventories. And also note the upcoming burst of gasoline demand for Thanksgiving. We also heard today that companies had booked forward USG loadings into Europe. This in turn resulted in some companies selling the forward CFDs. It all sort of makes sense. The bulls were having fun. Well, it’s been another day of peaks and troughs. Europe woke up in a frenzy and wanted to try Brent for $75 but came up short and it took a second assault to break through the ceiling at 15:42 GMT. Before 18:00, markets cemented the move above the $75 handle.

Dubai was very strong today and physical gained an impressive $1.32/bbl to reach $74.15/bbl. Once again, the price was right for Europe and it bought Brent, and almost touched $75 by the Asian close. We said yesterday that $75 could be on the cards, and it’s been teasing us this morning. Brent futures closed at $74.77/bbl, $1.21/bbl up on the day. But then the choppiness we’re getting accustomed to in European trading came in and the upward march stalled and dropped back towards $74.30/bbl just after 09:00 GMT. Dubai’s strength saw Brent futures/Dubai partials drop to 62c, from 73c yesterday.

Up, up, up it went! Brent flat price surged through the European morning, blowing through the $74 handle before midday in London from below $73 at Europe’s open. Fears around big missiles and bomb threats produce massive market moves! $75 was tantalising, but Team America decided not today. A gradual, bumpy decline through the afternoon put Brent back below $74, and it closed the European session at $73.91/bbl. Dubai set the tone for the day and North Sea traders didn’t want to break the cagey mould. Shell raised its bid for a 12-16 Dec Midland to Dated +$1.70 but nobody was tempted, while Gunvor withdrew its 13-17 Dec and 21-25 Dec Midland offers at $2.50. Compared to their previous showings, Totsa went suddenly silent in the North Sea after barely bothering to show up in Dubai this morning. Maybe 19 Dubai convergences and 6 North Sea cargoes in November have given the French their fill. Alternatively, they could just be feeling the effects of a big old binge yesterday. Feeling a bit worse for wear, monsieur?

This morning, Brent flat price went higher, why? Was it a delayed EIA data reaction or better demand signals from Asia or just a market that has been tired of going down. We share that some of us, think we could $75.00/bbl. We also expect a much higher demand for gasoline during the Thanksgiving period amounting to 1.3 more trips than last year. And also more flying. We will verify the data in two more weeks. By 11:30 GMT, Brent surpassed $74, beyond yesterday’s peaks. WTI lagged slightly and struggled to break above its highs yesterday but it did exceed $70 again. The weekly EIA report was more bullish than first glance may have suggested. PADD3 crude stocks fell by 4 mb, a big 1.18 mb/d increase in imports and a 110 kb draw on distillate stocks. Forget gasoline now driving season is well in the rearview mirror and focus on distillates instead. Cushing is still bone dry and saw another 140 kb draw.

In the North Sea window today, Totsa just couldn’t help itself. Just one more… and again it’s Unipec facilitating, as in the Dubai window. France against China, hmm. We will watch! Totsa bought a 10-14 Dec Midland from the Chinese at Dated +$2.10. Exactly the same deal as they struck last night, to the date and to the cent. Unipec clearly knows how Totsa likes it! And, once again, Equinor is desperate to offload its Johan Sverdrup, offering a 1-3 Dec cargo at Dated -$2.75 after not getting any interest at Dated -$2.60 yesterday. Trafi also came in and bought a Forties from BP for 12-14 Dec at $1.15 over Dated.

Totsa, the European hungry man! He’s going to explode at this pace eating up PG barrels and also North Sea! It was “a one man show!” during the window, according to traders. What are they doing with all this stuff? Tea Pots, say our sources but there was even a rumour of a PG cargo going to Europe. ‘But we are over the winter demand hump, we are buying February to refine in March,’ said a Singapore-based trader. March is typically one of the low months in demand due to turnarounds.

Totsa just can’t get enough. The French grabbed three more cargoes in this afternoon’s North Sea window! And all that after accumulating 13 convergences in Dubai so far this month. There’s no sating the French appetite. In today’s North Sea window, Totsa took a 10-14 Dec Midland from Unipec at Dated +$2.10, a 9-11 Dec Forties from BP at $1.15 over Dated and put Equinor out of its misery, lifting an 11-13 Dec JS once the Norwegians had lowered it down to Dated -$2.35! Once that was lifted, Equinor immediately withdrew its 1-3 Dec and 6-8 Dec JS offers. By the way, the Johan Sverdrup field is still operating at only 2/3 capacity, and Equinor hasn’t a clue when it will be back to full operation. Totsa’s gluttony for crude meets Equinor’s desperation to get rid of it and makes for a match made in heaven.

Today was a cornucopia of convergences! 7 in fact! 3 more to Totsa, 3 to PetroChina and Equinor collecting the last one. Vitol’s strong showing on the sellside brought a convergence to Totsa, for an Oman, while the French also received Upper Zakums from Unipec and Exxon too. Totsa’s got 13 convergences already in November. Oh boy, they are hungry! Light work for a major with such a huge appetite! The waiter just can’t keep up, bringing platter after platter to the ravenous patron. Meanwhile, PetroChina collected three Upper Zakums, from compatriots Shenghong and Unipec, as well as Phillips. As the cherry on the convergence cake, Exxon declared an Al Shaheen to Equinor.

Panic stations! All production at Johan Sverdrup is offline due to smoky electrical wiring at an onshore power converter station, according to our call with their spokesperson. That makes for 755 kb/d of oil equivalent out of action. Equinor also stated it is too soon to say when the field will be back up and running. At least they pinky promised they were working on the issue. They certainly should be: according to our calculations, given today’s prices, that lost production will cost Equinor over $50 million per day. Brent flat price seized the opportunity to make a break for it and surged up beyond $73 through the afternoon. It held onto those gains through the Trafi-dominated window to end the European session at $73.15/bbl, just over a buck up from Friday. And all that just as Equinor proudly announced discovery of North Sea oil and gas deposits near the Troll field on Thursday.

The $3.6 billion Singapore oil fraud saga committed by O.K. Lim is playing out its last scenes. It’s curtains really as OK Lim is sentenced to 17.5 years in prison for committing the biggest trading fraud ever perpetrated in the island state. Naughty, naughty. For an 82-year-old, that’s effectively a life sentence in the most literal sense. The presiding judge gave no concession for Lim’s medical conditions and age and said that a “deterrent” sentence was justified and necessary. Fudging the numbers here and there to hide losses can come with a hefty price tag. Due to our experience in the oil market, we knew OK and his son and others in his management team fairly well. They seemed to have more money than the bankers and at some point, I published a list of the banks giving his company LCs. The banks and traders were surprised at the web of interlinks. We are also following the nickel fraud case where the fraudster ensnared some of the top folks in Singapore.

Markets are getting tired. The stock market is down and oil’s flirting down near the $71.00/bbl market. And the biggest shiny thing of all, lasting gold, is heading toward $2,500 an ounce. Where to find refuge? Well, where people are in conflict and sadly the Russians and Europeans are at it again with an Austrian court trying to punish Russia’s Gazprom. As Batman surely wants to tell Putin, Wham, Bam, Pow. But who is the poor victim? The European consumer, as Russia says, no gas for you! 😊 And prices rise over ten percent. Don’t go into a gun fight with a pocketknife, the baddies told me in Britain. This week’s been chaotic in flat price. Brent is keeping us alert with constant ducking and diving. Monday’s dump of over $2 put us deeply back into the low 70s and cast a shadow over the week. It still feels heavy. A plunge on Wednesday and a bumpy ride yesterday and today tell us the price yearns for a 60 handle. It’s a matter of time. Today’s final surge stalled at $72.30/bbl and Brent closed the European trading week at $72.14/bbl. A post-window dump had prices down to $71/bbl by 18:00 GMT.