A persistent trend in the Dated Brent complex this month has been one-week rolls selling off into pricing, revealing that the strength implied in the curve fails to materialise in the physical. Aligning with this, we saw significant 18-22 Aug vs Cal Sep buying last week and over the past couple of days; however, the 18-22 Aug one-week roll fell from printing +$0.37/bbl at the end of last week to negative at the start of this week, although it is now bid at +$0.10/bbl.
Focusing on the physical, on 18 Aug, we saw Mercuria buying Forties cargo from BP and Equinor buying Johan Sverdrup from BP. Total and Phillips 66 bought WTI Midland, with Gunvor offering WTI Midland. Generally, flows now appear fairly balanced, with the curve poised to move in either direction. This balancing act was also seen in CFDs: We initially saw support in the prompt CFD structure, with the 1-5 Sep three-week roll roofing up to $0.96/bbl on worries that WTI Midland would not be able to make its way into Europe amid news about a shut US port. However, this fear has since eased, leading to an unwinding of length by sell-side flow in prompt structure, with the 1-5 Sep three-week roll softening to $0.80/bbl. The market has drifted from an overbought market to a more neutral curve, adding to directional uncertainty. Nevertheless, the M1 Dated/Dubai has fallen below zero at -$0.50/bbl (at the time of writing on 19 Aug), which, with freight not too high, could incentivise Asian buyers to buy European crude grades. Moreover, we saw good Asian hedge buy-side interest in the 26-29 Aug one-week roll last week due to a higher Saudi OSP print, which incentivised these players to buy Mediterranean grades, giving them exposure to Dated Brent. While this specific flow has dissipated, a competitive Dated Brent relative to Dubai could provide a floor to European crude oil prices.
