The Official Reports

Debate and speculation should soon come to an end. From Trump’s criminal trial and expecting Biden to stand for a second term, to Trump’s post-assassination attempt defiant fist raised photo and potentially the first ever female US president. So many models and projections, voter sampling and interviewing. Betting odds versus polling. It all comes down to today. This is the most important election of our lifetime. Hang on, didn’t they say that in 2020? And 2016. And probably 2012 and 2008. Essentially, it’s important. Expect fireworks, and not only in the UK for Guy Fawkes night. The US election is reaching its crescendo after months of build-up and anxiety. We’re sure more than a few grey hairs owe their discolouring to the stressful lead-in. On the final European close before the election, Brent ended at $76.01/bbl but quickly sold off to around $75.50/bbl.

Brent surpassed $75 yesterday and consolidated those gains today ahead of the US election. It finally closed at $75.26/bbl and rose further after the window. OPEC is surely punching the air. Its announced postponements and dillydallying to returning supply appear to be paying off. But they can’t stave off the inevitable forever. Despite those promises to delay unwinding of cuts, Iran is gearing up to bolster production. The Iranian Economic Council approved the financing of an “urgent” boost to crude output by 250 kb/d, though didn’t provide a timeframe for the increase. We guess Chinese teapots are thirsty for more cheap crude given struggling margins, as 2025’s import quotas just rose. And it’s good for Iran too; it gets to sell more oil!

The gap between the two US presidential candidates has been closing in both the betting market and polls. FiveThirtyEight shows a 1 point Harris lead on average, where just last week she was 1.4 points ahead. In the betting odds, Polymarket is showing a 58.1% chance of a Trump triumph, 10% lower than last Thursday… it’s like someone is scripting this to go down to the wire. Harris looks set to win the popular vote, according to Polymarket, but it doesn’t matter how many people vote for you if they’re in the wrong place. Many analysts have given a lot of credence to betting odds, so it’s crunch time to see if that confidence was misplaced. The Dems beat Trump to something: 20 states saw gasoline prices fall below $3/gallon!

OPEC caught us on the blindside with its extension of voluntary cuts, kicking the oil can down the road to at least the end of December. They’ve entrenched themselves in defence of the $70 line, declaring: “No pasarán!” Or is it the $75.00 line? And the markets liked it, with flat price opening around $1.40/bbl up from Friday’s close. OPEC must have enjoyed October’s increased oil prices, pumped up by geopolitical anxieties, and decided it wanted to keep them there. A similar announcement in September provoked little price reaction, as most market participants expected the cuts to be extended, but were more divided for the progression of OPEC’s supply this time. Crucially, in September, they announced a 2 month extension – this time it’s 1 month. Members’ patience is thin; they want to sell crude and they need money!

Brent flat price saw a choppy day as the geopolitical risk premium was reignited. We oscillated between $75 and $74 for most of the day. But then the Americans came in and decided the price was too high so sold it down to $73.50. They clearly saw Iran’s promise to hit Israel at the “appropriate time and manner” as an admission an attack wasn’t imminent. After all, we eventually closed at $73.46/bbl. How low will we go once this geopolitical risk premium finally dissipates? The fundamentals don’t look good, whoever you talk to. The stage is set to send this sucker down.

A surge upwards on reports Iran would retaliate against Israel yesterday evening set us up to begin November above where we expected, as prices shot up faster than a ballistic missile launch. Markets are still very twitchy hearing headlines about dangerous geopolitical developments. And once the Europeans woke up, they wanted to get in on the action, spurring Brent flat price to almost $75/bbl by 08:45 GMT. A post-window selloff, however, saw it fall back towards $74 before midday.

October has been a rollercoaster ride. With fears of chaos from the Middle East, and hurricanes huffing and puffing across the Gulf of Mexico, we’ve seen some big and sudden price moves. Brent even breached the $81/bbl level at the height of war paranoia. Fortunately, Israel’s relatively minor retaliatory strikes soothed concerns, and we ended up only slightly higher than where we started the month. At least until the latest war talk came out this evening about another major Iranian retaliation. OPEC also semi-announced it would not increase production but only the long traders believe them.

Ahead of tomorrow’s expiry, physical diffs remain backwardated, at around 40c, though the macro picture is little changed. Geopolitical concerns have eased since last week, yet Brent flat price is stubbornly maintaining the $72 handle, with 37c of backwardation in the front spread. But, at 12:25 GMT, a headline reporting OPEC could postpone its supply cut unwind sent flat price straight upwards. We’re still susceptible to aggressive headline moves in such a jittery market, but it’s only a matter of time before the 60s come a-knocking.

Well, we made it through October and we’re almost went back to where we started! The Brent flat price low was on Oct 1 at $70.34/bbl and we closed the Asian oil trading month at $71.95/bbl. What a rollercoaster it has been as our readers grappled with bad macros and two, actually three, recalcitrant nations bent on laying waste to defenceless civilians. Really, the battle of the grandpas. Age is no barrier, particularly when you are in command. We had missiles going there and coming back while producing nations surely thanked the old folks for the widening geopolitical oil premium. Just give it a rest, we say as we look forward to the US elections where almost surely we will have a change in the *** guard. I don’t want to repeat the same adjective, lest someone accuse me of ag*ism. But yeah, despite the boom boom the premium came off and we are again staring at the line where the 7 turns into a 6 and the recurrent budget cutbacks hit the oil industry. We are there anyway and as a prelude results released by the industry are bad, really bad. And even Saudi Arabia is putting out the cap hoping to borrow just a smidge to tide them over. It is that bad.

A double dump just after 15:00 BST sent Brent flat price well below $71. Or was it a double tap? On the back of the head of course. Netanyahu could hold talks with ministers about an orderly end to the war in Lebanon. We’d be delighted to see a diplomatic resolution but remain cautiously optimistic; we’ve seen many headlines speculating about peace talks in the past year. Strong resistance around $71 held firm despite the headline. But, should that break, we could see a rapid recalibration towards the 60s. There’s a trapdoor. It’s only a matter of time before there’s too much weight on it and we fall through. Brent closed at $71.02/bbl. The 60s are calling… The window saw BP offering Midland at $1.80 over Dated. Eni showed up too, offering Ekofisk at Dated +$1.75, and Mercuria came in to bid for Forties at Dated +$0.45. Totsa took a break from its incessant bidding in Dubai, to offer a Brent at $0.70 over Dated. Diffs are coming back up to around 33c. Brent futures front spreads are 45c, so things are finally starting to make sense again in the North Sea… for now.

In the window today we got a frenzied cat and mouse. Or perhaps more like a bull and a cowboy, between Totsa and Chevron. Despite le Totsa Taureau’s best efforts, the physical premium got slammed down to 78c in the penultimate Asian trading day of the month. That’s half the value of October’s average premium! Chevron’s cattle wranglers were hitting bids as soon as they landed on the table, catching Totsa in a tight lasso. After Chevron declared an Upper Zakum to Total yesterday, the window’s bonanza saw them converge twice more! This time for another Upper Zakum and an Al Shaheen.

The Nothing Burger US/Israel-Iran ding dong sent prices directly downwards. The low 70s should soon give way to the 60s. We miss the decade, or is it just the music? We’ve already got plenty of anti -war protests, just prepare for a return to rock and roll and big hair dos. Traders needed a moment to breathe after the open’s $3 free fall and prices vibrated around through the day, gradually descending to eventually close at $71.97/bbl.

Well… the Sucker sold off. Macros took over the market and a six handle is coming for a third and final time. The Israeli parsimonious retaliation, if you can call it that, underwhelmed everybody and the market sold off. Oil is off. Depending on the time of the day, it’s 6% off. The Sucker really took it on the chin. Israel struck military targets in Iran early Saturday morning. The poxy retaliation underwhelmed and saw the risk premium get whacked. Front month Brent shed around 5% from Friday’s close. Now the geopolitical risk premium that was fluffing up prices seems to be dissipating, what’s left to stop the free fall? Macros are really bad, the Saudis are bringing production back in December, and ADNOC looks set to follow. Sentiment is undeniably bearish, and a descent to a $60 handle looks almost certain. Will we even be trading Brent with a number starting with 5 soon? The market has to facilitate storage and for that it needs contango.

The US is looking ever more set for a return to Trump. Bookies are now giving the Donald a 65.6% chance of winning the election, less than two weeks before the polls. The polls still show the two on level pegging. Which do you trust more? Additional supply coming from OPEC in December might offer some help to struggling margins, as crude prices should fall and thus open up the margin. Additional voluntary cuts from Saudi Arabia, Iraq, Russia, the UAE and some other members took 2.2 mb/d off the market. If the Saudis are bringing back around 1 mb/d, as we’ve heard they are, that leaves 1.2 mb/d unaccounted for and we don’t imagine the Russians or Iraqis will want to miss out on that kind of market share and potential revenue. As our catchphrase goes: they need the money!

Le Totsa Taureau says “Sacré bleu!” as the physical premium is eviscerated. Exxon was leading the charge. We’ve been thinking the physical premium for Dubai was disproportionately strong given the weak fundamental picture in Asia. And today we saw that differentials collapse. Those betting physical Dubai would keep up its momentum have seen those hopes go down the drain. The physical premium tumbled by 39c all the way down to $1.14 – that’s the lowest we’ve seen since 27 August!