Market Update
Over the past week, the Dated Brent market has been undoubtedly bullish as physical differentials rose from $0.28/bbl to $0.55/bbl between 28 Oct to 4 Nov. Petroineos have been consistent bidders, whilst Geneva-based trade houses were bidding Forties, lending support to near-term physical demand. Brent’s flat price has been buoyed by OPEC+ delaying plans to increase output, which has also lent support to Brent spreads. In addition, rising gasoil prices have improved refinery margins, providing a more supportive backdrop for crude. The Nov’24 DFL has risen from $0.30/bbl to $0.50/bbl w/w, while deferred spreads have largely corrected higher after initially seeing a drastic drop at the beginning of last week (28 Oct to 01 Nov) following the deflation of geopolitical risk.
The backwardation in Brent spreads and the Dated market have been extremely robust, and crude bulls are in the money. However, the question remains as to whether or not this recent strength is sustainable. Counterparty type data suggests increasingly bearish sentiment in the back-end November and December structure. Here, refiners were the main sellers in Dec’24 and Jan’25 DFL. Meanwhile, on the CFD front, the key selling flows were concentrated in the back-end November weeks from trade houses and majors. Gunvor demonstrated substantial selling interest in the cash spread during December’s Brent future expiry. On the window of 4 Nov, Gunvor offered Brent for a range of dated, withdrawing two offers and was lifted by Petroineos.
Northwest European refinery margins strengthened in the final week of October, driven from a stronger European gasoil complex. The uptrend suggests that the gasoil crack has bottomed out, with the rally driven by prompt tightness and exacerbated by short covering flows. As refineries come out of autumn maintenance, they will be incentivised to take advantage of the stronger margins, which might supported Dated demand in the short-term.
