Summary
In the early hours of Saturday, Israel launched a series of targeted airstrikes on Iranian military targets, killing 4. This move has temporarily eased the oil market’s anxieties, which have been high on Middle Eastern tensions and the geopolitical risk premium associated. Iran’s response to the strikes has been perceived as quite measured. Ayatollah Khamenei urged caution, emphasising that any response would be a military decision. Israel, on the other hand, seems satisfied with the operation, with Prime Minister Netanyahu describing it as precise and successful. The Biden administration appears keen to cool tensions ahead of the upcoming US election, which has Trump projected to win in many polls and betting sites.
The outright product prices inched up in the week as crude strengthened to over $75.55/bbl in Jan’25. Looking at the technicals, price action for the flat prices traded within the Bollinger bands with the RSI trending downwards but remaining in neutral territory. But with prices neither overbought or oversold, it shows that trends are not particularly aggressive nor sustained in either direction, as the week to 24 Oct was defined by a lack of clarity in the geopolitical landscape which affects the contracts. RSI for all three contracts was pressured even as the flat prices increased which shows the momentum of the strength was really weakening and there may have been even further consolidation if it wasn’t for the strikes on 26 Oct.
The WTI/Brent forward curve continued to be quite irregular down the curve. The curve lifted in the week, with the Jan’25 contract increasing by 20c/bbl, although due to the uneven nature of the curve, the week-on-week change narrowed into the second half of the 2025 contracts. This is interesting as it perhaps shows the soft landing impact on the US economy being caught up to or more production under Trump.
Looking at the 30-day correlations for the futures contracts, the RBOB crack and the crude contract have developed a stronger positive correlation as there has been a stronger Brent-driven flow in the market and points to speculative players, rather than physical hedging.
