Dec’24 Brent futures rose from $73.20/bbl at the start of the week to $76.50/bbl on 24 Oct morning but not without volatility. The benchmark crude futures contract shot up to $76/bbl on 22 Oct before selling off the next day due to an EIA-announced build of nearly 5.5mb in US crude oil inventories. Despite rising again on 24 Oct, prices have fallen to $74.45/bbl as of 15:45 BST (time of writing). The market seems unable to make up its mind about sentiment.
Geopolitical risk appears to be waning, but it must not be ignored. At the same time, the market remains squeamish on a bullish China oil demand story due to a lack of clarity regarding fiscal policy. An added driver of market anxiety comes from the much-awaited US Election (in under two weeks now!). 10-year Treasury bond yields surged to multi-month highs this week despite expected rate cuts, as traders bet a Trump presidency could increase inflation and lower bond prices, given the former President’s love for the word “tariffs”. This may slow down the Fed’s easing cycle, with the OIS pricing only 23bps of cuts at the next FOMC, potentially impacting risk assets such as oil. This market is frantically seeking a reset button, and only time will tell whether American voters are the antidote we’re all waiting for.
In crude, the Dated Brent physical differential has stabilised and climbed to $0.14/bbl this week. The Nov’24 DFL reached multi-week highs and found support on a Dated-to-Lead basis. As Nov’24 Dubai crude sees intense selling pressure, the Nov’24 Brent/Dubai rallied to the highest level for an M1 contract since June 2023.
In fuel oil, the 3.5% barges complex was the main story as the M1 crack surged to all-time highs at -$2.50/bbl. This was driven by supply tightness, including Med strength and lower-than-usual imports from the US. The Sing 0.5 complex also rallied on stronger premiums, and the arbitrage pull has in turn, lifted Euro 0.5 structure.
In distillates, ICE gasoil started the week strong, with spreads and cracks rebounding but remaining weak overall, partly due to waning geopolitical risks. Sing gasoil and Euro jet saw increased buying interest, with Sing 10ppm strengthening due to refinery outages and Euro jet seeing potential upside on rising demand expectations ahead of winter.
In gasoline, over the past week, we saw weaker EBOB and RBOB cracks amid increased selling and less aggressive buying, particularly in deferred cracks. In deferred spreads, while there was some support from physical buying and short covering, selling pressure dominated, with the Dec/Jan’25 92 spread in contango.
Naphtha has been really illiquid, although sentiment and price action seem firm with cracks well bid, even in the dips, even as crude rallied. The pricing spread is up from -$1 to +$1/mt in Europe. This physical window has been well bid and the MOC was well-matched, amid physical buying flow.
In NGLs, US TET (Energy Transfer) propane found support mid-week on bullish EIA stats. Far East Asian (FEI) propane saw weaker windows, although a possible early start of crackers may boost propane demand. Saudi (CP) propane remains high despite rising competition with US cargoes, which may hint at a bullish OSP announcement next week.
