Rangebound prices have been the outcome of the fortnight. Volatility is down and players have been all but absent, celebrating the Lunar New Year and the in-progress IE week. Fundamental drivers have not really been driving as prices in March have bounced from good selling at 50c/bbl to keen buying at 30c/bbl with range trading like this has seemingly turned a blind eye to the cooling tensions in the Middle East, for example. Trade houses have been adding a good deal of length into the Mar Brent/Dubai, where they now hold a net long 3.63mbbls position as they have been buying at the lows seen.
Both refiners and majors have added more sell-side positions in the past two weeks in Mar and banks have had flows on both sides as the market seems happy to knock the prompt around from counterparty to counterparty with little in the way of axes to be seen. The Mar/Apr Dubai spread fell to lows of 45c/bbl on Feb 26 as trade houses trimmed over 2.4mbbls of length in the Mar/Apr spread from Feb 20-23 and 710kbbls of selling seen from refiners in the same time frame.
Boxes sold off aggressively from Feb 16-20 as the back was better bid. Concurrently we have seen trade houses and banks buying up Q2 and Q3 which further pushes the pressure onto the front of the curve. Mar/Apr Brent/Dubai lost 13c/bbl on Feb 16-20, although the prices have rebounded, as in this rangebound regime players are quick to find discrepancies in the curve, leaving it a hard market to call. It seems the best risk/reward for going long may be further down the curve where we have seen this good-size bidding.
