Reports

The Nov’24 Brent Futures contract was volatile this afternoon, trading at $72.77/bbl at 12:00 BST and oscillating up to a high of $73.85/bbl around 16:20 BST before correcting to the $73.15/bbl handle by 17:00 BST (time of writing). This volatility could be attributed to market players adjusting their positions, both in cautious anticipation of the US Fed rate cut this evening and in reaction to EIA data for the week ending 13 Sep, showing that US crude oil inventories fell by 1.63 mb and production was down by 100 kb/d. According to a Reuters poll, analysts had predicted a 500 kb decline in US crude inventories, indicating that last week’s Hurricane Francine may have caused a greater drawdown than expected. In the news today, Bloomberg has estimated that Russian crude oil revenues have dropped by 30% since June, largely due to international benchmark prices falling and depressing the value of cheap Russian crude. This decline in Russian crude comes despite the fact the country’s oil exports averaged 3.21 mb/d for the four weeks leading up to 15 Sep, 80 kb/d higher than the four-week average to the week of 8 Sep. In other news, as the market becoming increasingly divided on the Fed action, former Cleveland Fed President Mester has said today she favours a series of 25 bps cuts rather than a 50 bps cut. Whilst Fed funds futures predicted a 61% chance of a 50 bps cut, major brokerages now expect a 25 bps cut including Goldman Sachs, Nomura, and Deutsche Bank. Whichever move the Fed makes at 19:00 BST, either cut will likely cause further volatility in crude prices. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.76/bbl and $1.78/bbl, respectively.

Nov’24 Brent Futures flat price rallied from $72.59/bbl at 12:00 BST up to $74.20/bbl handles at 17:45 BST (time of writing). In the news today, Venezuela’s largest oil refinery, the Amuay refinery, has been reported as offline since 12 Sep due to a power failure, according to Reuters. The refining facility has a capacity to process 645 kb/d and suffers frequent power outages due to a chronic lack of investment. In other news, two Chinese refineries, Zhenghe Group and Shandon Huaxing Petrochemical Group, were declared bankrupt today after creditors failed to agree on restructuring plans for the refineries, as stated by Bloomberg. The processing units at these plants have not been operational for several months due to refinery margins plunging, particularly in Shandong. Finally, South Sudan’s President Salva Kiir has agreed with the leader of Sudan, Gen Abdel Fattah al-Burhan, to export crude oil via Sudan, following months of disrupted supply due to a damaged pipeline network amid civil war in Sudan. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.72/bbl and $1.82/bbl, respectively.

Nov’24 Brent Futures flat price climbed this afternoon from $71.76/bbl at 12:00 BST to $72.50/bbl at 17:25 BST (time of writing). The increase in crude prices comes as players wait and watch for further directional cues ahead of the Fed meeting on 18 Sep. The market is still hindered by bearish sentiment, however, amid demand worries in China and offline capacity in the Gulf of Mexico. In the news today, there has been much speculation as to whether the Fed will cut by 25 or 50 basis points. This will mark the first US interest rate cut since March 2020. Proponents of the view that the Fed will cut by 50 bps include Michael Feroli, analyst at JPMorgan, and Bill Dudley, the former New York Fed president and Bloomberg columnist. In contrast, Satyam Panday, chief US economist at S&P Global Ratings, foresees three cuts of 25 bps, one every Fed meeting for the rest of the year. Whichever way the Fed chooses to move on rates (25 or 50 bps), it is clear that the consensus is looking for a cut in the Sep/Nov and Dec meetings. In other news, in a note by Callum Bruce, Goldman Sachs has commented on oil price weakness, with Brent slipping below $70/bbl last week. Goldman Sachs claimed that Brent crude could recover to $77/bbl in Q4 ’24, on the condition that demand concerns abate, positioning and valuation recover, and OECD inventories remain somewhat below normal. However, their analysis also highlights the risk of comfortable inventory levels allowing the market to price in an expected 2025 supply surplus, potentially hampering recovery of crude prices. At the time of writing, the front month (Nov/Dec’24) and six-month (Nov/May’25) Brent futures spreads are at $0.60/bbl and $1.51/bbl, respectively.