QatarEnergy’s joint venture, which aims to convert the Golden Pass LNG import terminal in Texas into a large-scale export facility, has requested a three-year extension from US authorities to complete the project by 30 November 2029
Saudi allocations to Chinese refiners for October have jumped. Before we get into the details note the increase is in sharp contrast with the output stability narrative by OPEC. Key question to Saudi Arabia: if you are not hiking production, why are you increasing allocations to your customers? According to sources, Unipec got 14.5 mb for October up from 11 mb for September. Rongsheng, the favourite of the bunch, remains the primary recipient, at an unchanged 16 mb. These two take the lion’s share of supply. Total allocation grew to 45.5 mb in October, from 43 mb in September, just shy of the 3 mb increase we expected. As we’ve been saying, China doesn’t need much crude to fulfil its ailing demand, so where is this all going?
Nov’24 Brent Futures flat price found support this morning after a relatively quiet night, trading at $72.40/bbl at 07:00 BST before it saw resistance at $72.75/bbl around 10:50 BST and eased off to the $72.70/bbl level at 11:20 BST (time of writing). In the news today, the ECB has cut rates by 25 basis points, as was expected, for a second time in three months, to 3.5%. President Lagarde has said the ECB is determined to reach its inflation target of 2% over the medium term, however, has not yet specified an exact time frame for this goal. In other news, six Exxon and Shell refineries in Louisiana have resumed operation amid little significant damage from Hurricane Francine, as per Reuters. Production outages in the US Gulf Coast caused by the storm stood at 730 kb/d as of 12 Sep. Finally, Libya’s political factions have not reached a final deal on the central bank yet, the UN mission says. Sadiq al-Kabir, ousted governor of the Central Bank of Libya (CBL), told Reuters that international banks have suspended all transactions with Libya. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.64/bbl and $1.63/bbl, respectively.
Nov’24 Brent Futures flat price initially dipped this afternoon, decreasing from $71.72/bbl at 12:00 BST down to a low of $71.08/bbl at 14:55 BST, before sharply rallying up to the $72.28/bbl handle at 17:30 BST (time of writing). The increase in price may have been due to a combination of new speculative long positions alongside the liquidation of existing short positions and stronger sentiment in the physical market. In the news today, Saudi Arabia is set to boost crude oil exports to China in October by around 3 mb, as Chinese state refiners PetroChina and Sinopec have asked Saudi Arabia for more supply. This could be a sign of China’s propensity to stock up on commodities at lower prices, with Saudi Arabia having reduced the price of Arab Light to Asia by $0.70/bbl for October. In other news, Giovanni Staunovo, UBS analyst, stated in a note to clients that Hurricane Francine may have disrupted the supply of up to 1.5 mb of crude, amounting to 50,000 bpd. The category 2 hurricane has since weakened to a tropical storm, decreasing from wind speeds of 100mph down to sustained speeds of 35 mph. Finally, the Kremlin has begun a counteroffensive in the Kursk region as Russian soldiers attempt to push back Ukrainian forces, corroborated by President Zelenskyy. Meanwhile, Moscow’s troops have been steadily advancing through Eastern Ukraine, approaching the logistical hub of Pokrovsk. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.55/bbl and $1.41/bbl, respectively.
Things that remind me of the 60s: tie-dye, flower crowns, the space race, psychedelics, and the front-month Brent futures contract. Bearish sentiment almost appeared omnipresent this week in Brent, with the prompt Nov’24 futures contract dipping below $70/bbl for the first time since December 2021
Blimey! Brent’s surge into the European close burst up beyond the last few days’ levels to carry us firmly back into the $72/bbl range. The bears went too deep into enemy territory and now they have to pay up! The super-short market will be feeling the pinch from this afternoon and we’re sure some will be kicking themselves for jumping on the bandwagon of $60 Brent too early.
Nov Brent futures premium over Dubai partials has inverted in recent sessions, with Dubai, “oddly outperforming” according to one trader. Today Brent reclaimed some ground. Weak macros have failed to shake prompt strength out of Brent; front spread rose to 53c of backwardation. Consensus from APPEC was overwhelmingly negative, OPEC let a little air out of their ballooned demand forecast, and today the IEA revised down their demand forecast for 2024, it’s not a pretty picture. With very few trading months left for 2024 oil, where is the strength coming from?
The November Brent Futures contract has seen stronger price action this morning, reaching a peak around $71.86/bbl at 08:30 BST before retracing slightly and again rallying up to trade at $71.83/bbl at the time of writing (11:20 BST), as major producers extend production cuts and evacuations in the Gulf of Mexico. In recent developments, the US Bureau of Safety and Environmental Enforcement (BSEE) reported that 46% of the Gulf of Mexico’s 371 manned platforms and 60% of personnel from five rigs have been evacuated, with four rigs moved off location due to Hurricane Francine. The loss of production amounts to approximately 675kb/d, and contributed to prices rising this morning, especially with Libyan production remaining largely offline but nonetheless despite bearish EIA data emerging yesterday. In other news, Saudi Aramco has signed additional agreements with China’s Rongsheng Petrochemical and Hengli Group, advancing talks on refining and petrochemical sector cooperation. Aramco signed a Development Framework Agreement with Rongsheng, exploring the joint development of Saudi Aramco Jubail Refinery Company (SASREF) and potential cross-investments. Rongsheng may acquire a 50% stake in SASREF, while Aramco could acquire 50% in Rongsheng’s Ningbo Zhongjin Petrochemical Co. Ltd. At the time of writing, the Nov/Dec and Nov/May’25 Brent spreads are at $0.55/bbl and $1.41/bbl, respectively.
In addition to our regular Monday CFTC COT analysis report, Onyx Insight will publish its own in-house CFTC COT forecast ahead of the official Friday report. The model forecasts changes in long and short positions using machine learning, utilising Onyx’s proprietary data.
The signals for emerging surplus are coming in. Everywhere you look the curve has flattened. From Dubai to the North Sea, benchmark grades are struggling to muster even the slightest backwardation. The flattening has been particularly acute in Brent. Yesterday time spreads down the curve dipped their toes into a bearish contango. At 76c, Dec/Dec spreads closed the weakest in over 3 years. Compared to three months ago structures are starkly different.
