The Officials

Get ready for $5 premia! Dubai just won’t stop! Its physical premium jumped to $4.70 today, from $3.77 yesterday. We don’t have enough exclamation marks to communicate that! This has dragged up the average physical premium in January trading to $2.42 – it was $2.19 yesterday and only $1.08 in December. The only way for Dubai was up again! In just one week, Dubai has gained over $8/bbl, making more than a 10% weekly rise.Totsa’s not slowing down just yet, it’s got to tighten the screw some more. It keeps hoovering up yet more partials, no matter how strong Dubai gets. Towards the end of the window, sellers were pouring offers onto the table and Totsa was just piling them into its bulging swag bag. Unipec was again the biggest provider to Totsa, though Reliance pulled its weight too, and PetroChina sold a few as well. Vitol seemed happier sniping bids and picked off plenty from Idemitsu. The numbers on the buyside were sparse, but Totsa and its January sidekick Idemitsu made up for their isolation with good old-fashioned enthusiasm. Totsa’s also topping up on Al-Shaheen from QatarEnergy, which handed over two cargoes at premiums of $3.70-$3.80. Thirsty! There hasn’t been much Al-Shaheen in the window – it’s just been Oman and UZ.

Good news at last! Hamas has apparently agreed to the terms of a ceasefire with Israel, with Israel set to vote on the deal tomorrow. This would see Israel and Hamas exchange hostages and prisoners and hopefully bring an end to the most damaging conflict the region has seen in years. We hope this delicate peace holds. We like peace 😊
The North Sea was peaceful too. BP was at it again, coming in early to bid for more Sverdrup in the window – can’t fault them for enthusiasm! However, no sellers were tempted out of the woodwork and the British major went home empty handed, no matter how quickly it raised its bids. Totsa joined in alongside BP but was less fortunate than in the Dubai window, with the absence of sellers.

Brent fought tooth and nail to hold onto the $80 handle for much of the Asian session and built up towards the mid-$80 level by the time European traders were rubbing the cobwebs from their sleepy eyes. There was a sense that the flat price had risen too much. Sources expected longs to pare back positions leading to a retracement but probably only towards $78. “It is good to be long ahead of Trump’s inauguration,” said a source. Another wondered if Biden would fire more sanctions but concluded there wasn’t time for more mess and mayhem before January 20th. Brent quickly fell from its $80.63/bbl peak at 07:45 GMT to below $80 before 09:00. But nothing sticks for long and flat price was soon jumping back above $80.

We’ve heard on the grapevine that the US state department was chinwagging with certain majors to discuss the market’s state ahead of unleashing sanctions. The US wanted to make sure that excess supply they see in the market was accurate, and taking out Russian and Iranian barrels would not lead to runaway oil prices. According to our source, the market perceived excess capacity to be sufficient to mitigate any significant shortage, with the usual overproducers filling the gaps (without naming any names – we know it’s all about omertà 😊). This advance warning helps explain the leaked embargo document. That same privileged information may have even led to early buying by some ahead of the official announcement of sanctions on Friday, when things went bananas. The moral hazard involved with canvassing entities with an innate commercial interest is clear 🤦‍♂️. As soon as the US state department is on the phone asking about the effect of sanctions, it’s time to get buying. Even so, the market feels like it’s in limbo, waiting to see what Trump has in store. Traders from China and the US we spoke to expect China and India to keep going for WAF and Latam grades until the incoming administration’s stance on sanctions becomes clear.

Curve balls every minute! It is not fundamentals but governments messing around and of course the taxpayer gets it on the nose or the jaw . Totsa’s really kicked the hornets’ nest. With its tender yesterday, and the one today, Totsa got inundated with people asking politely for cargoes. The French major suctioned up vast volumes of crude from the Dubai window, and the Chinese and Indian buyers want it. ‘They got really lucky,’ says another seller. ‘We all want to be long ahead of the Trump inauguration,’ he added. Rongsheng and CNOOC got one VLCC each at nearly February Dubai +$2.50 – for Upper Zakum and Oman, exactly the grades Totsa has collected most of through the spot market. Totsa’s having a field day and is asking for more offers to buy its crude today. They’re really cleaning up and should thank Mr Biden for squirting his sanctioning hose at exactly the right time to bring their months-long strategy to fruition.

Brent flat price spent a heady morning above $81, unfamiliar with such lofty peaks and slipped back towards an $80 handle after lunchtime here in London. But in the window, it managed to breach $81 again and finally closed at $81.12/bbl. Flat price had a choppy day but managed to hold onto the gains made on the Asian open this morning. The North Sea window was choppier than a butcher’s shop. There was only one trade but that doesn’t mean activity was limited. Forties was still the crude of choice, but BP’s CIF offerings found little interest. PetroIneos and Mitsui were on the other side, bidding FOB cargoes. PI’s persistent bid raising saw BP pop up to sell a late Jan cargo at Dated +80c to the British-Chinese combo. By our counting, that’s the 6th North Sea cargo for PetroIneos in 8 trading days! BP and Totsa were both after Sverdrup, but the grade proved elusive – where’s Equinor when you need them?! Glencore was offering Midland at +$2.45 over Dated but also saw little interest. PI clearly weren’t satisfied with just the Forties and bid for a 6-13 Feb Midland at Dated +$1.90 too. With all that, traders saw the physical diff reach around 80c.

The 80s are back. Brent even went above $81 for much of the Asian session, closing at $81.28/bbl. Its peak was higher than Everest, touching $81.59/bbl shortly after the window. That’s the highest Brent flat price has gone since late August! Chinese and Indian buying, with a mixer of potent US sanctions and freezing weather make for a strong cocktail. Let’s just hope somebody doesn’t wake up with a heavy hangover when the effect wears off.

Red Alert: British Gas owner Centrica has warned us gas in storage runs out in a week. Nice knowing you all. But we can still have a taste of $80 oil before we tuck in for the endless frozen night. Brent burst through $80 after 2 pm in London and broke up to peak at $80.67/bbl by around 230 pm in a frantic surge. However, the over-$80 period lasted just 40 minutes. It felt like flat price was ticking a 2025 accomplishment off its inhabitants bucket list and was happy to get it out of the way before returning to normal 70s service, albeit very elevated in the upper range. The Brent flat price surge sent shockwaves through the entire oil complex. The front month Brent spread threatened to break $1, but never quite made it.
Refining margins held surprisingly steady, supported by great strength in diesel, with the front month gasoil and heating oil cracks both rising around 7% today (remember the cold 🥶!). This offset gasoline’s weakness. A freight trader noted a sudden jump in spot VLCC rates as the March WTI/Brent spread overextended. Indeed, March WTI struggled to keep up with Brent’s extraordinary move, with the spread trading down from around -$3.72 to a low of -$3.96 at 13:00 GMT before WTI staged a minor comeback and the March spread closed at -$3.89.

Before the rally really took hold, in the Dubai window we saw a stream of “Totsa buys from”, making just a few bids early on. There were also small buyside contributions from Mecuria and Mitsui. But it was clearly the French major setting the pace again today. Unipec, Exxon, Trafi, Reliance, Koch, Vitol and PC were all offering, but even despite the pressure from all sides, Totsa’s continued thirst for Dubai grades saw premiums up again to $1.77. That’s the highest premium in 2025! (We know we’ve only had 7 sessions but let us have our fun ). Dubai partials closed the window at $77.95/bbl, the highest physical Dubai close since 11 October! Totsa were at it in October, November and December, so why stop in January? Keep milking that winning strategy like an endless cash cow!

If you want something to get your blood pressure up, look no further than the global sovereign debt market. Markets are sliding as people say ‘Who’s going to give my money back?’ and worry about major defaults. The US, UK, France, the selloff is infecting them all faster than bird flu. Governments have gorged and binged in loose fiscal frameworks like hungry children in a Grimm’s fairytale and now it’s coming back to haunt them. Rising inflation expectations and growing anxieties about fiscal irresponsibility are driving yields through the roof. The UK’s 10-year gilt yield opened at 4.92% this morning, the highest since 2008; 10-year US treasury yields are around 4.7%; French OAT yields are the highest since 2011. They’ve borrowed more than Mary Norton’s fictitious invention and now the tide is coming up to claim them. It’s going to be a bloodbath when all the chickens come home to roost…

Saudi allocations to Asia are out! No major surprises other than volumes declining but only moderately. Crude allocations to Chinese refiners fell to 43.5 mil bbls for February delivery, down from 46 mil bbls in January. That’s still far above the 36.5 mil bbls they assigned to China for December, as the Saudis fight for market share. Rongsheng retained top spot, being assigned 16 mil bbls, while Unipec got a 2.5 mil bbls bump from January to reach 10.5 mil bbls. The month’s losers were Shandong and CNOOC, which both didn’t get a drop, having received 2 mil bbls in the prior allocation. CNOOC’s had a rough couple of days, what with the US designating it a company that supports the Chinese military and slapping sanctions all over its shipping.

Certain traders make a lot of dosh from the UK power market but it’s all Paddington can do to hold onto his hat and try to hang onto his rapidly evaporating winter energy budget . We’re certainly feeling the pinch of the current cold snap seeing demand surge, coinciding with a lull in the wind slashing production from windfarms. And just yesterday Mr Milliband was gloating about wind power overtaking gas as the biggest source of electricity… “British comedic timing”, as one trader put it.

Chinese demand ahead of the New Year remains fairly strong and has been driving flat price and structure. There was only one way for Asian trading to take Brent, Dubai and anything else: up! The Asian session opened and had us firmly back in the $77 range, before it closed at $77.60/bbl. A violent spike immediately after the window saw it jump to peak at $77.88. The $78 handle is dangling, tempting flat price up, but Brent is yet to establish a beachhead on those lofty slopes. $80 could be in the cards before everybody disappears during the upcoming celebrations for the year 4723. In the Dubai market, Totsa almost seemed overwhelmed by the number of offers, scrambling to lift them all before it lost out. Exxon, PetroChina and Reliance were all raining down offers onto the trading table, while Unipec threw a few down too, as well as hitting the few bids that buyers had chance to enter. Mercuria was one of the few buyers that managed to land a couple of bids – that were set upon by a voracious Unipec. Totsa got a whacking from the Chinese state company too. Totsa was obviously the heavy lifter, bulging like a Bulgarian weightlifter under an immense load he’s holding above his head. But is it in triumph? Well, Totsa did enough for the Dubai physical premium to firm up a touch and reach $1.60!

The North Sea window was a chaotic affair. Forties, Brent and Midland were hurled across the floor. There were plenty of bids for FOB Forties – from Mercuria, Mitsui and a rare appearance from Petraco. But the Forties offers were for CIF cargoes only. Gunvor’s 19-23 Jan CIF Forties got picked up by Trafi at Dated +$1.35. Having both offered and lifted Forties yesterday, BP returned to offer Forties again today, but didn’t get any interest.
However, the British major also offered Brent for 22-24 Jan and lowered its offer to Dated +$0.20, sparking buying interest from Mercuria who bought the cargo at this level. Gunvor entered the window offering Midland and didn’t budge from its original offer of $1.60 over Dated for a 20-24 Midland. Eventually, PetroIneos scooped this up at the offered price. A messy one but that’s when it’s most fun 😊

The window saw 2025’s first convergence, on the fourth trading day of the year. No prizes for guessing who picked it up. Of course it was Totsa. And naturally it was Exxon providing. Exxon declared an Upper Zakum cargo to the thirsty French aspirateur. Totsa was happy to lift bids from any of a number of sellers. Unipec’s offers, those from Trafi or Reliance, they all got a bashing. Vitol got a smack too, as did Shell. But the number of sellers was overwhelming, as Totsa’s mighty effort failed to halt the slip in both the Dubai physical flat price and Dubai physical premium from yesterday. The buyside players were few in number, but Totsa’s aggression made up for its solitude. Only Mercuria and BP were also there, and their bids went largely unnoticed in the sea of Totsa lifting and sellers working at full speed to keep a handle on the rampaging Taureau. Despite another impressive showing from Totsa, the Dubai physical premium slipped to $1.56, 5c down on the day. Is the indefatigable monster finally flagging? Can it make it to Chinese New Year in February, when we’ll get a couple of days with no Singapore window?