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The Dec’24 Brent futures contract saw consistent support this afternoon, moving from $74.88/bbl at 12:00 BST up to $76.00/bbl shortly before 17:00 BST, before weakening slightly to $75.60/bbl at 17:20 BST (time of writing). Price action saw upward pressure this afternoon amid renewed geopolitical risk in the Middle East.

In the news, Israeli military strikes across the Gaza Strip have killed at least 72 people since Thursday night, after Israeli forces raided the Kamal Adwan Hospital in the northern Gaza. Meanwhile, Lebanon’s economy minister has said the conflict between Israel and Hezbollah has displaced more than a fifth of the 5.5 million population, with many fleeing to Syria according to Bloomberg.

In other news, due to its increased use of natural gas for power generation, the US is now more dependent than fossil fuel power than China. Fossil fuels had an average share of 62.4% of total electricity output in the US since June, compared to 60.5% of generation between June and September in China, as per Reuters.

Finally, according to S&P Global, Portuguese state-owned Galp Energia has begun a second exploration at its Orange Basin block offshore Namibia. The first of four wells, Mopane 1-A, is now known to have been constructed on 23 Oct and may hold as much as 10mb of oil. At the time of writing, the front-month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.37/bbl and $1.57/bbl, respectively.

Throughout the week to 22 Oct, the Dec’24 Brent futures contract initially saw a lack of strength, trading around $74.50/bbl levels and moving down to an intraday low of $72.90/bbl on 18 Oct. However, the Dec’24 contract regained some support since, trading at $76.25/bbl at the time of writing on 24 Oct.

Prices were pressured down throughout most of the week amid ongoing concerns of poor Chinese oil demand and pessimism surrounding the efficacy of China’s monetary stimulus for the real economy, alongside a lack of clarity when it comes to fiscal policy.

In spite of this, Brent futures found strength at the end of the week on heightening geopolitical tensions in the Middle East. In line with this increasing strength, Onyx’s weekly CFTC COT predictor anticipates a boost in speculative long positions in Brent alongside a modest reduction in shorts for the week ending 22 Oct.

In addition, we anticipate producer/merchants to increase both long and short positions in Brent futures by 30.3mb and 42.1mb, respectively, indicating an increase in hedging.

The Dec’24 Brent futures contract saw sustained strength this morning, trading at $75.73/bbl at 07:00 BST and moving up to $76.50/bbl at 11:10 BST (time of writing). Price was supported amid intensifying regional conflict in the Middle East and reports of North Korean troops ready to aid Russia in Ukraine.

In the news today, Israel has launched strikes on the Syrian capital Damascus and a military site near the city of Homs, killing one soldier and injuring seven others, as per Reuters. Meanwhile, Russian President Putin said today that the Middle East is on the brink of a full-scale war, in a statement made at a meeting of the BRICS+ group in Russia.

In other news, Transocean is in talks to merge with rival offshore drilling contractor Seadrill, looking to capitalize on the boom in deepwater oil exploration, according to Bloomberg. After the announcement, US shares of Seadrill jumped 10% while Transocean shares were up 3.7%.

Finally, refiners on the US Gulf Coast have been increasingly turning to Latin American heavy crude, with Mexican state-owned Pemex and Valero Energy both buying Colombian grades, as per Bloomberg. This came as the Trans Mountain line diverted Canadian oil to Asia, with US refiners seeing their usual supply thinning. At the time of writing, the front-month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.45/bbl and $1.86/bbl, respectively.

The Dec’24 Brent futures contract sold-off this afternoon, from $75.76/bbl at 12:00 BST and falling to $74.33/bbl at 17:25 BST (time of writing). In the news today, Reuters reported that US and Israeli negotiators are due to gather in Doha to restart negotiations for a Gaza ceasefire deal, with the head of Israel’s Mossad due to attend, according to Prime Minister Netanyahu’s office.

In other news, Saudi Arabia’s oil export revenues have hit a three-year low, standing at $17.4 billion in August 2024, down 15.5% y/y, as per data from the country’s General Authority for Statistics. Finally, Norway’s largest oilfield, Johan Sverdrup, is expected to hit its production peak by early 2025, after hitting a one-day production record of 756kb/d for Q3’24, according to S&P Global.

The operator of Joan Sverdrup, Equinor, stated that the platform is currently on a plateau in production until its expected 2025 peak. At the time of writing, the front-month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.36/bbl and $1.46/bbl, respectively.

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.

The Dec’24 Brent futures contract saw weakness this morning, trading at $75.93/bbl at 07:00 BST and falling to $75.10/bbl at 11:10 BST (time of writing). After the release of API figures yesterday evening, showing US crude oil stocks rose far above market expectations of 0.3mb up to 1.64mb, price has declined further amid anticipation of EIA data releasing at 15:30 BST today, with the market expecting a 700kb build in US crude inventories.

In the news today, Israeli strikes across Gaza have killed 20 people, with Israel stepping up their operation following the death of Hamas leader Yahya Sinwar last week. Meanwhile, US Secretary of State Antony Blinken urged Israel today to use this opportunity to end the war in Gaza, stating Israel should be looking to bring home remaining Gaza hostages and agree to a ceasefire.

In other news, India’s Finance Ministry are considering a proposal to scrap the windfall tax on domestic crude oil production due to falling international crude prices, as per Reuters. Finally, Saudi Arabia’s economy is projected to grow by 4.4% in 2025 partly due to OPEC+ unwinding production cuts in December, a Reuters poll of economists showed.

This would be Saudi Arabia’s highest rate of growth in three years, with only 1.3% growth expected for 2024. At the time of writing, the front-month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.37/bbl and $1.69/bbl, respectively.

Summary

Propane flat price contracts took a significantly bearish turn at the start of the fortnight ending 22 Oct as the geopolitical risk premia from the regional escalation of tensions in the Middle East waned. The Nov’24 Mont Belvieu TET (Energy Transfer) propane (C3 LST) saw bearishness into the fortnight due to a larger-than-expected build of 3.4mb on 17 Oct (for the week ending 11 Oct). However, the following week’s draw flipped sentiment in US propane, with the Nov’24 C3 LST rising to 76.50c/gal on 23 Oct (at the time of writing).

In the East, the Far Eastern propane Index (C3 FEI) witnessed weaker price movements over the past fortnight, with the contract noting increasingly bearish pressure amid the volatility in crude, low Baltic freight and offers in the physical. The Nov’24 LST/FEI propane arb strengthened amid C3 FEI’s weakness, climbing up to -$235/mt on 23 Oct (at the time of writing).

The front-month differential between C3 FEI and NWE propane (C3 NWE), the propane East/West, fell from above $70/mt on 16 Oct to $65/mt at the time of writing. Similarly, the Nov’24 differential between C3 FEI and Saudi Aramco propane (C3 CP) dropped from above $30/mt on 16 Oct to $23.50/mt at the time of writing. This FEI/CP weakness may have been worsened by a softer BLPG1 freight (from the Middle East to Asia), with the M1 freight falling from $66/mt on 09 Oct to $53/mt on 22 Oct.

The market will now be awaiting the Nov’24 CP propane and butane OSPs – due to be announced at the end of October for a more concrete view of CP sentiment into the new month. Still, India’s appetite for oil products is expected to grow into Q4’24 amid the country’s upcoming festival season and post-monsoon agricultural season, which may support sentiment for CP LPG.

US n-butane (Enterprise Butane, or, C4 ENT) dropped from 2.875c/gal on 16 Oct to 1.375c/gal on 21 Oct, where it found support and climbed to 2c/gal on 23 Oct (at the time of writing).

The Dec’24 Brent futures contract initially showed strength this afternoon, trading at $74.60/bbl at 12:00 BST and moving up to $75.70/bbl at 15:20 BST, however, sold-off to $74.80/bbl at 17:20 BST (time of writing).

Dec’24 flat price sold-off shortly after the release of EIA data at 15:30 BST today for the week to 18 Oct, which showed a build of 5.47mb in US crude oil inventories, much higher than the expected draw of 0.7mb. In the news today, US refiners are projected to report lower margins for Q3’24 amid tepid fuel demand and increased global supply, according to Reuters estimates.

We saw the NYMEX 3-2-1 crack peak at $16.86/bbl before the release of EIA stats today, before trading down to $16.60/bbl at the time of writing. In other news, Hezbollah has confirmed via Telegram that Hashem Safieddine, a likely successor to Hassan Nasrallah, was killed in an Israeli air strike three weeks ago, as per Bloomberg.

Finally, Italian insurer Generali has announced it is ending coverage for companies involved in downstream oil and gas operations if they do not meet energy transition requirements. This move is based on the long-term goals of the Paris Agreement, which aims to limit global warming to less than 2°C. At the time of writing, the front-month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.37/bbl and $1.54/bbl, respectively.

The Dec’24 Brent futures contract found strength this morning, moving from $73.85/bbl at 07:00 BST up to $74.95/bbl at 11:20 BST (time of writing). Prices have been supported this morning as tensions heighten in the Middle East, with airlines including Emirates and Qatar Airways now suspending flights to Iran.

In the news today, US Secretary of State Antony Blinken has arrived in Israel to meet Israeli Prime Minister Netanyahu and revive ceasefire talks. Just a few hours before Blinken’s arrival, Hezbollah has fired several missiles into Tel Aviv and Haifa, according to Financial Times.

In other news, Russia’s seaborne crude shipments have risen to their highest level since June this year. Russia shipped 3.47mb/d of crude in the four weeks to 20 Oct, a 140kb/d jump in four-week average cargoes, as per data by Bloomberg.

Finally, the Chinese Ministry of Commerce has increased China’s 2025 crude oil import quota for non-state-owned firms at 5.14mb/d. The ministry will add and adjust quotas based on companies’ demand and new capacity. At the time of writing, the front-month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.38/bbl and $1.63/bbl, respectively.

The Dec’24 Brent futures contract saw sustained strength this afternoon, trading at $74.82/bbl at 12:00 BST and reaching $76.20/bbl at 17:45 BST (time of writing). Price action was on the rise this afternoon as the Chinese Ministry of Commerce lifted its crude oil import quota for 2025 by 6% to 5.14mb/d, as per Reuters.

In the news today, the IMF has lifted their 2024 growth forecast for the US by 0.2% to 2.8% but has cut the forecast for China by 0.2% to 4.8%, citing continued weakness in the property sector and low consumer confidence. The IMF’s 2025 China growth forecast was unchanged at 4.5%.

In other news, Chinese demand for natural gas is set to jump by more than 50% by 2040 and reach 100m tons in LNG imports very soon, according to an executive at Cheniere Energy, Yingying Zhou, in a statement at the Asia Gas Markets conference. Finally, a Bloomberg report revealed that the US is monitoring shadow fleets in Southeast Asia, posing safety and environmental hazards.

Malaysian coasts currently harbour the largest cluster of shadow fleet tankers, where ship-to-ship (STS) transfers are made to hide the origin of the oil. At the time of writing, the front-month (Dec/Jan’25) and six-month (Dec/Jun’25) Brent futures spreads are at $0.50/bbl and $1.77/bbl, respectively.