The North Sea is choppy as we enter October, and choppiness dominated the Dated Brent market this fortnight, with few signs of this ending. In the last report, the physical diff was strong above a dollar, with a Chinese bull play holding strength and bidding was seen in a few grades. 20 Sep seemed a turning point for the market with BP offering Brent, although PI lifted this. The following week (23-27 Sep) saw strong selling from the US, with Exxon offering Forties and ConocoPhillips offering Ekofisk, with Ekofisk key to setting the curve currently. This US offering helped the phys diff be implied at less than a dollar on 25 Sep and, combined with futures selling, Dated took a dive. In October, following a fairly weak expiry, there is decent strength held in the Dated complex, as PI flipped to selling the diff fell to 65c, where it has been implied steadily. The past few windows have been pretty quiet. PI has stopped its buying and US selling is quieter. The waters are choppy and not so busy.
Nov’24 expiry was weaker than expected, with Glencore selling all day and the cash trade failing to maintain +10c, but the market has recovered fairly well following this. There is a chance this is just the routine Bal roll-up, but it seems the market is happy to range trade with herdy swings. Despite the lacklustre physical market, we have seen renewed buying interest out of 07-11 Oct CFD; this implies the diff around 80c, with the main buyers being the usual Geneva trade houses. Looking forward, the diff in the front looks quite high, but we are expecting some cargoes bought in 7-11 Oct, so this may bring about the roll-up. In futures, it seems the risk/reward is skewed long when considering the structure of the market and the sell-side saturation. The regime in Dated is less bullish; the market is now fully pricing in October barrels, which were committed to being weak and the physical window is quiet. There has been a lot of pain in the Dated market lately. Hesitancy and a choppy market could lead to further herdy price action, although there are pockets of good value in the curve.
