The Official Reports

It’s convergence week! Totsa just can’t get enough. It gained yet another four convergences today: an Upper Zakum from each of Exxon and PTT, an Al Shaheen from Trafi and an Oman from Phillips. At least we’ve finally broken free of the Upper Zakums and got some variety in the grades being declared. Totsa just hasn’t been able to restrain itself this month. Le rampaging Totsa Taureau threw down his cigarette and baguette and came to try to save the tumbling physical premium this week, bidding and lifting all over the place. Look at how many convergences it’s got! 10! That’s 5 million barrels. Enough to keep France going for days! But rumour has it they’re taking it East anyway…

Prices just can’t decide between up or down. So, they do both. Up, then back down again. It’s more fun that way. It keeps us guessing. Overall, though, the line of travel is clear. The downward plunge this afternoon was briefly interrupted by the EIA’s stocks report showing a chunky draw on gasoline stocks, but quickly regathered for another dive. The fall continued even after the close at $72.40/bbl, to quickly wipe out the daily settlement change, with some interest. Before 18:00 GMT we were troubling $72.

Oil demand over estimation by international bean and barrel counting organizations continues unabated. Yesterday it was OPEC’s turn to say China’s demand was growing by 450 kb/d, today it’s the IEA. Can anyone admit they got it wrong and make a large correction to account for China’s oil product consumption contraction? Well, it appears not. We are small and armed not only with conviction but also with data. As our wall says in our refurbished gigs, ‘without data, you are just another person with an opinion.’ China’s oil consumption has fallen out of bed and all our sources are reporting close to 1 million bbls contraction in gasoline and diesel. We feel so strongly about this we sent letters to major international organisations to alert them of the change which, by the way, didn’t happen overnight. We’re monitoring the reaction and holding our breath. Wish us luck. 😱

It’s breathless. Frantic. Prices are up, then down, then up. But prices are going nowhere. We briefly broke under the $71 floor this afternoon, but flat price quickly recovered. Lennie saw the rise in the European morning and was convinced a rally was on the cards. But then it tumbled again when Team America didn’t like such a high price tag but rose through the window. Lennie just can’t catch a break! After all that excitement, Brent closed the European session at $72.17/bbl once cent down from yesterday. OMG, we need to lie down.

The Convergence Day!  Two cargoes to PetroChina and two to Totsa. The signals were clear that PC would be a physical lifter and Totsa is always game. Buyers in Dubai’s window stubbornly refused to go higher than $71.15, or maybe they were afraid to get smacked and some did. Eventually, buyers went no higher than $71.14 on their bids and chomped on several offers at $71.15. A reinvigorated Totsa was a ravenous buyer, bullish again but hey, prices are a bit low, aren’t they. We think Totsa’s great at ‘doing the arb’ versus the INE Shanghai crude futures contract. Said instrument creates opportunity for those willing to deliver mid sour grades into the approved delivered tankage. So, buy Dubai grades in the window and deliver to China. Glencore came out as a buyer too. Exxon was the big seller and Reliance and Unipec joined in, among others.

Wishful thinking continues to run amok. All the grandees in the consulting and oil forecasting world are so wrong that it is not even funny, but yeah, we will chuckle. 😊 Nothing compares to sending people to the ground for them to sniff and report back. And yes, The Officials and Onyx personnel have been on the ground meeting Chinese companies in Beijing more recently and talking to oil folks and people on the ground. And an NOC employee almost joined us on the Beijing trip. DEMAND IS DOWN! Please folks, allocate some budget for the foreign travel into China, see it and detect the changes.

The Brent futures structure got slammed with tumbling flat price. Front month Brent spreads are down to just 19c this morning. And Dubai went along for the ride too. The Dubai physical premium tumbled to 47c – the lowest since early June! Despite Totsa’s valiant efforts, channelling the spirit of Verdun in this morning’s window, Unipec’s incessant bid hitting forced physical premiums down. Someone’s in the money and someone’s getting shafted. With the average physical premium for November falling to just 65c after today’s weakness, Totsa looks like it miscalculated with all its buying in October, when the physical premium was above $1.50! Sellers are in command once again.

The sucker got pushed off a cliff when Europe got fed up with such high prices and decided it was time to give it a good kick in the pants. And so went Brent flat price… down the rollercoaster, We’d be terrified to take such a ride. Precipitous is the only way to describe it. Europe didn’t like trading with a $74 price tag and decided $72 would be more fun. Or even $71 by late afternoon. Are the 60s calling for Brent again? For a third, conclusive time? La tercera es la vencida. Team America didn’t turn up and flat price kept going lower. Eventually, battered and bruised, it reached Europe’s close at $71.88/bbl.

OMG, China is weak! China’s Saudi December allocations are down. What happened there, is demand down -IT IS- or the Saudis prices are too juicy? Well, that too! Headline buyers and partners Rongsheng only bought full allocation and nothing extra. ‘We bought our full allocation,’ said a source. PC also disappointed with only two million bbls! This is bad.
Total allocations are a meagre 36.5 mill bbl, down from previous months. November’s allocation to Rongsheng was actually only 12 mill bbl, rather than the originally reported 14 mill bbl. This puts last month’s total at 38.5 mill bbl and December’s total to 36.5 mill bbl, while September and October saw 43 and 45.5 mb, respectively. I almost see a cat with the legs sticking up in the air! This isn’t painting a picture of overwhelming crude demand! EVs keep on crunching gasoline demand, and diesel is bad too. Just a bad story. One source believes the lower allocations will see refineries going to the spot market to get top ups. If they don’t, the ghost of the black cat will smile at us and float away. 👻 PetroChina is not disappointing, they couldn’t get enough Dubai last week. They were really guzzling. Also recall that PetroIneos, PetroChina’s joint venture with Ineos, has bagged 6 cargoes in the North Sea window so far in November.

Trends exist to get bucked. Today the yanks gave up their bullish ways. A tearing dump at 15:00 threatened a line of resistance at $74 and finally sent flat price down into the mid-$73 range and it consolidated to close at $73.57/bbl. The last few days have been divided between weak flat price action in the morning, followed by a rally as the Americans came in for the afternoon stint and sent it back upwards. The North Sea window was hectic but we got some bids! Mitsui offered a Forties for 27-29 Nov at Dated +$0.50, while BP played to both sides for different grades: bidding Sverdrup at -$1.75 over Dated, which Equinor hit, while its offer of a 7-9 Dec Brent at Dated +$0.40 went unanswered. Eni is still trying to shift its Ekofisk, lowering a 25-27 Nov to Dated +$1.10. Gunvor’s offer of a Midland at $1.35 over Dated was lifted by PetroIneos – yet another cargo for the thirsty British-Chinese venture. That makes 6 in November. Remember PetroChina’s been buying lots in Dubai too. Phillips was still offering a Midland, down to Dated +$1.40 but didn’t find any takers.

We were waiting for what seemed like forever, but China’s fiscal stimulus is finally here and they’ve thrown the kitchen sink at it. China announced 10 trillion yuan for refinancing local government debt. Financing debt with debt. No risks to see here. They will raise the local government debt ceiling to 35.52 trillion yuan and are enabling the issuance of 6 trillion yuan in special bonds. Possibly panicking having seen the FTSE A50 Index futures nosedive over 5%, officials later announced an additional 4 trillion yuan. What could possibly go wrong? 5% GDP growth must be achieved. No matter the cost. But Trump Tariffs are coming. Standard Chartered and Macquarie said 60% tariffs from Trump could damage Chinese GDP by 2%. The export-driven economy is really dependent on US customers: 15% of China’s 2023 exports (that’s $500 billion by the way) headed across the Pacific to American importers, according to UN data. That’s a big slice of the pie.

A general downtrend through the morning shifted into reverse when the Americans woke up (again). Flat price got choppy – they’re less decisive about where they want their oil price than who they want as president! A foray beyond $75 before the window was partially pared back by the close, but Brent held on to end the day at $75.09/bbl. Post-window, it climbed again, towards the upper-$75 range. The bears are ever more numerous. Citi expects prices to tumble with a Trump presidency. The big bank now expects Brent to average $60/bbl next year. It thinks a second term for Trump will be bearish by relaxing the regulatory environment: reversing Biden’s increases to royalties, costs for minimum bids and lease rates on Federal lands highlighted as important drivers. According to Citi, Europe and China are particularly “exposed” to the risks of a blazing trade war. Citi had already been projecting only around 700 kb/d of oil demand growth this year, so it’s not like they’re new to the bearish camp, but they’ve doubled down on their position.

The giddiness from the Chinese stimulus continues across many markets. INE contracts have risen, fuelled by retail demand and this has opened the arbitrage to deliver Middle Eastern crudes into the INE qualified tanks. Such Arbs have led a lucky few like Vitol and Totsa buying relatively cheap Abu Dhabi grades to deliver into China. Of course, some Chinese sources complain, and they use the M word. But maybe in this case it’s in reference to the small retail guys
The Dubai window saw the Chinese come to the fore. PetroChina seized the role of biggest bidder, lifting offers from anyone and everyone. As is becoming customary, Unipec was a big seller and today and these two were rewarded: Unipec declared an Upper Zakum cargo to PetroChina. Shenghong joined in on the sellside again, while Totsa finally seemed to get tired out, collecting just a few partials, as did Equinor. As ever, Exxon was firmly on the sellside and hit numerous bids, while Trafi and Reliance also dished out a few. The Dubai physical premium has tumbled into November from its heights, where it averaged $1.53, but has slid to an average of $0.70 in November so far.

Now we’ve had our fill of democracy, the hysterical clamours from all sides about the US election will hopefully subside soon, as the world assesses another 4 years of Trumpism. Team America seemed buoyed by the election news and sent flat price up on a $2.50 rally from lunchtime in the UK, undoing the Asian and European traders’ efforts to sink the price. Just short covering or soon-to-recede waves of optimism? A 2.1 mb build in crude stocks shown by the EIA was a stumbling block for the afternoon rally flat price had been enjoying, but it quickly overcame a small dip. The inventory stats are most interesting as a longer-term trend. Overall, since the week ending 27 September, despite a couple of minor draws, US crude stocks have risen a total of 14.615 mb. Cushing is up just over 3 mb in the same period. That’s not giving signs of a country thirsty for more oil! After a sizeable 2.71 mb draw in gasoline stocks last week, these rose alongside crude inventories, up 412 kb.

TRUMP IS IN! He’s claimed victory ahead of the boring suits that could not bring themselves to stating it when it was already obvious. Wisconsin’s result confirmed the win, pushing him over the fabled 270 electoral votes. And the Republicans look set for the hattrick: Trump as president, a majority in the Senate and a likely majority in the House of Representatives too. A hole in one for the golf-loving returning president. International leaders have joined the customary chorus of congratulations. Modi’s heartiest congratulations, Starmer calls it historic, NATO leadership… they’re all at it. Israel’s Netanyahu seemed particularly gleeful, announcing Trump’s win a “huge victory!” But is there trouble in paradise? Last night, Netanyahu fired Defence Minister Yoav Gallant, a stubborn thorn in the Prime Minister’s side. Iran, meanwhile, doesn’t seem to think the election will change much for them. Wishful thinking or calling his bluff? We saw aggressive sanctions against Iran in Trump’s first term, which could well return. And don’t forget the biggest open festering wound of all, the Ukrainian war. We hope things cool down a bit! Young men and civilians will thank Trump for sure, maybe even worship him!