Edge Updates
Dated Brent Report – Lots’a Totsa
The physical Dated market remains very strong, with the physical differential remaining in triple figures for around ten days now, at 104c/bbl on 25 Nov. There has been a slight introduction of softness this week as players are pricing in the physical, which is projected to come off into December. In the window, all eyes have really been on Totsa in the past week or so as they have been supporting the physical diff with good cargo buying, potentially for placing into Chinese refineries. There seems a slight unease in the market as they expect this play to end soon and the gap between the physical support and the forward curve, which has seen some softening on expectations of this. We don't know how much more ammunition they have here, how many more barrels they can buy before the rug is yanked from the market. Talking of Yanks, we are expecting strong US exports in the coming weeks, with Midland cargoes likely flooding the Dated market. How much of this wave Totsa is prepared to buy is another question.
Dated Brent Report – Trump: The Arb of the Deal
There was an election across the pond last week, but it would be quite a feat of mental gymnastics to immediately connect the results with the Dated Brent market. Yet, the ramifications of Trump's re-election may have significant implications for Atlantic Basin fundamentals, as we detail in today's Onyx Alpha trade ideas report. Maybe not quite 'drill baby drill', but ongoing growth in US crude production and exports will likely weigh on the WTI/Brent spread, and further weigh on the Dated Brent physical. But in the meantime, the market continues to be topsy turvy. A US physical player has been eager to lock in this arb and fixing their paper deals ahead of time. The HTT (WTI Houston vs WTI Trade Month) has been locked in, alongside the WTI/Brent and freight. Basis risk remains, so we can expect 2025 DFLs to be sold at anytime to complete this process. Indeed, the arb of the deal. Lock in.
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Dubai Market Report – Brent/Dubai getting low, low, low, low, low
The Brent/Dubai continues to narrow, with the front-month contract falling below $0.50/bbl, the lowest level for a front-month contract since September. On paper, Dubai crude has gained much of the strength lost in previous months. The fundamental story suggests a bullish market reaction to the expectation of OPEC+ prolonging their output cuts into Q1. Previously, the Brent/Dubai forward curve had priced in the expectation of extra barrels, which has supported outright levels. The entire forward curve has shifted lower from $1/bbl to around $0.80/bbl. We have officially returned to the 'standard' regime of Brent/Dubai selling, and Dubai spread buying, as evidenced by our market positioning data.
Dubai Market Report – Funds Fiending Brent/Dubai
November continues to be a lacklustre month in the Brent/Dubai complex as market participants gradually retreat and become more risk-off leading up to Christmas. Glance no further at open interest levels where market risk is focused in the front tenors (Nov’24, Dec’24, Jan’25), which have plateaued and declined recently. In contrast, open interest in the deferred contracts is roughly in line with their 5-year average. Reaction to fundamental news has been lacking, which has instead been focused on Brent. Perhaps some normality is much needed after a whirlwind couple of years.
The Officials: Watch out for the whirlpool!
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