The Official Reports

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!

It rose, then it fell much further. By lunchtime Brent had hit the mid $76 level but fell towards the low $74 through the afternoon. It settled here and closed at $74.52/bbl. Brent front spreads had strengthened with the spike in flat price, peaking at 46c, but came off in parallel too, down to 38c.
The window was silent – no bids nor offers to be seen. And the North Sea may become quieter still; Harbour Energy wants to end its operations in area. Just another party jumping ship before high taxes take effect. Laffer curve in action (for the economics nerds). Serica Energy also sees the UK’s jurisdiction in the North Sea as “un-investible”. It’s not looking all that great for the UK’s oil industry.

We hear that one of your favourite and most widely used benchmark producers – not us, obviously – is going for a tight embrace when it comes to setting subscription renewal rates. Their grip is so tight your eyes bulge first and then your guts burst out, so we are told. A squeeze so tight, it’s putting every trader’s efforts in Dated Brent to shame. The grapevine also reported that at least one subscriber was invited to renew at a 300% increase!

A steady morning selloff was reversed when the US came in and started buying at lunchtime, sending Brent back upwards. It peaked at $75.70/bbl but fell back down after the unexpectedly large 5.47 mb build in EIA inventories surprised markets and triggered a quick sell off. It finally closed at $74.92/bbl. The EIA’s weekly inventories data showed a far bigger build than their API counterpart last night. Gasoline stocks also grew, by 878 kb. But keep an eye on Cushing, which saw a draw in its stocks of 350 kb.

The physical window was much more active on the sellside today than recent sessions; the sellers were in the driving seat. Chevron was whacking bids left, right and centre. Reliance and Exxon also featured heavily on the sellside, hitting bids from the likes of Totsa and Mitsui, as usual. This culminated in Reliance declaring a cargo of Upper Zakum to Mitsui, while Repsol nominated one of the same to Totsa for their own convergence. But premiums are coming in, back down to $1.55/bbl. It seems like Dubai is starting to deflate. In paper markets, prompt structures have weakened over the month: the Nov/Dec swaps spread has fallen from 60c on the 7 October to 28c today.

Up, up, up it goes! Brent flat price climbed all day, with major surges in the late morning and then in the afternoon. It
kept on rallying beyond $76/bbl after the window. A pedal to the metal kind of day sent Brent to a close at $75.94/bbl.
A $3 rally over two days, but why? What’s changed? Wishy washy geopolitical fears haven’t seen anything to send
prices skyward. No great economic reversal to boost demand optimism. But maybe ‘He’ knows. He always knows.

Conflict is the gold dust on oil markets. $75.00 market here we are! Post window Brent markets rose up to $75.14/bbl.
After a softish close in Singapore, the rumour mill got going about Netanyahu meeting his military leaders this evening.
Pardon us, but Mr. N thought he was a hands-on man, who meets with them every day. Never mind, Brent duly
responded and showered money to all the longs after trading at nearly $73.50/bbl in the morning. Shorts are an easy
market in the period preceding whatever the Israelis want to do. We remain of the thinking that any action will be very limited in nature as the Election is soon and Kamala’s job is on the line.

As the US elections peek over the horizon and Trump serves up Maccies fries, the oil markets trudge on. We were on tenterhooks awaiting the window this afternoon after last week’s dramatic display of collapsing diffs as the Dated Donkey got hammered below the ground. Today’s window was offered, but above the zero line and no bidders played ball. Glencore offered two Forties cargoes: for Nov 10-12 at Dated +10c and for Nov 13-15 at +20c, but didn’t find any takers. Phillips was the other player offering, bringing a mid-Nov Midland at Dated +$1.60 to the table. The futures-physical dislocation remains, but may be closing in. Physical diffs are around flat, while Brent futures front spreads weakened from 40c on Friday to 32c today.

Flat price is in a funk, shimmying and sliding but going nowhere. The Iron Dome has been referred to as the Iron Colander following Iran’s strikes against Israel and it seems like air defences aren’t the only leaky thing in Israel. A leaked document appeared to illustrate Israel’s preparations for a retaliatory strike against Iran. The mole or tongue wagging source has not yet been identified, but don’t worry, the US is on the case. The Israeli military will have to go back to the drawing board and rework their plans. Despite this leak suggesting escalation is probable and maybe even imminent, Brent flat price did little at this morning’s open, though it rose steadily from around $73/bbl towards the $74/bbl handle by 10:45 BST. And another day, another ceasefire effort. The US envoy Amos Hochstein will reportedly hold talks with Lebanese officials today, aiming to arrange a ceasefire… again.

We’re hearing more and more people say Europe is slowly dying. We disagree. We think it is dying rather quickly. Economically, we mean. Or maybe it’s already in the zombie stage. The heartbeat is faint but the rhetoric is still strong. It reminds us of AI hallucinations. Brain and reality are not aligned. Debt and manufacturing weakness don’t make the region look healthy and it’s verging on flatlining. Just check out France’s insolvency filings! Corporate bankruptcies are up 49% since August 2021. Business as usual, nothing to see… Or better yet, nothing to see here after the companies are dead.

China beats GDP growth market expectations, but let’s start with Dubai and our famous Totsa Taureau! And, by the way, also keep an eye on the Brent/Dubai spread as Totsa sells North Sea and buys Middle East. Maybe they are following Macron’s destruction of the French budget as a hint to sell the European benchmark. It looks like Totsa’s monumental efforts in the Dubai window are paying dividends. Swaps remained steady, just 2c down from yesterday, as the physical strengthened. This put the phys premium back up to $1.68, above the October average again. Totsa must take much of the credit; it led the buyside pack’s forward march. The buyers and sellers came together at $74.19. Exxon hit bid after bid, but Reliance and Chevron were also selling. As ever, Mitsui joined Totsa on the buyside, and the old pals from way back in August, Vatman and Gobin, renewed their dynamic duo status, each picking up partials. But gone are the glory days of their domination of the window. Meanwhile, Trafi is keeping the market guessing about its strategy; in today’s window it flipped to the buyside, having been major seller in previous sessions. Repsol converged with Mitsui, nominating an Upper Zakum.

The physical and futures detachment still has us scratching our heads. Traders were waiting with offers on the table but found no bidder. Glencore offered a mid-Nov Ekofisk at Dated +$1.75 and a mid-Nov Forties at Dated +$0.45; BP and Total each offered an early-Nov Ekofisk at Dated +$1.45 and +$1.95, respectively. Phillips also offered a Midland for mid-Nov at +$1.75. A rare 640kb Hebron cargo was offered by Suncor at Dated -$2.15 for end-Nov loading. But none of these offers were met with a buyer.

The window was ram-packed with ‘sells to Totsa’ as bids were whacked almost as soon as they hit the table. The French major seems to be trying to defend a tired-looking physical premium which has declined from the $1.80s to $1.54 today. It reminded us of the Maginot line for those WW2 history buffs. We know what happened there. Totsa stepped on the gas and got hit for partial after partial, while Mitsui threw their hat in alongside the indefatigable French. At least someone in France has some money, even if the government doesn’t. Dear trader in Asia, look at Europe. It doesn’t look good.

The North Sea was brutal today. The Dated Donkey got killed and went subterranean. In yet another instance of Dated Brent and components acting wildly this year, Forties traded below the zero line, after bidding went as high as +$2.20 in early August. The instrument needs a proper think-through before too many producers and consumers buffeted by the volatility shout out words starting with F or M, which we could take for Fiddling and Manipulation. Maybe there are other nouns. Diffs got smashed as Shell kept offering a mid-Nov Forties down to -5c below Dated. It dangled for a while before Glencore lifted it. They had to think before going for the bargain. The differential collapse contrasted with a Brent flat price that only moved upwards by 25c. There was one other trade in the window: Equinor lifted an early Nov CIF Ekofisk at +$1.55 over Dated from BP. What’s driving Shell to send the physical diff down? We don’t know, but it worked!

After Monday evening’s plummet, Brent flat price continued to cool a little today. It closed Asian trading at $74.17/bbl and looks nearly ready to move lower again. Not quite yet though, as Brent appears to have found some support around the $74/bbl mark. The scale of the price drop following the Washington Post headline demonstrates that the market is still very nervous about any Middle East-centred headlines, although it has largely calmed down from overhyped fears that the passage of tankers through the Strait of Hormuz could be disrupted. Look back to the Tanker War in the 1980s, no one would want this, but it didn’t stop the flow of oil anyway.