Edge Updates
Dated Brent Report – Where My Bulls At?
The North Sea crude market is mired in weakness, with bulls absolutely nowhere to be seen. WTI Midland cargos have been flooding the market, courtesy of Gunvor, and if this rate continues, they could single-handedly erase the US's trade deficit. We initially thought the weakness was in response to OPEC+ cut rollbacks, but offers persisted despite a futures recovery. The amount of cargos offered is in the double digits, and Aramco and Exxon joined Gunvor on the sell side. Also on 12 May, Sinochem offered Forties, which was rare and unusual, flipping the script of the usual Chinese buying of Forties. The physical fell to lows of -$0.47/bbl on 8 May, though it has increased slightly to -$0.28/bbl by 12 May. Despite relative weakness in US grades and strength in refinery margins, there is a dearth of buying appetite in the front. Product markets seem well supplied, while West African (WAF) crude is overhung, add in weaker freight into the mix, and it is a cocktail for a fair bear run.
Dated Brent Report – Marginal Disconnect
The Dated Brent market continues to drift lower, with the May'25 DFL falling from a high of over $1.40/bbl last Wednesday (23 Apr) to $0.70/bbl at the time of writing on 29 Apr. Simultaneously, the lower crude levels have supported the M1 European refinery margin, which strengthened from $6.75/bbl on 23 Apr to $8.10/bbl at the time of writing. We saw banks selling the DFL to hedge these high margin levels, which drift higher as Dated Brent weakens further.
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Dubai Market Report – OPEC(QUE) MARKETS
This week saw a significant reversal in Brent/Dubai, with the M1 contract sliding from 5 May’s high of $0.75/bbl to $0.12/bbl (at the time of writing on 6 May). This decline marked a shift from the rally building up ahead of the OPEC+ meeting on 3 May. Nevertheless, this support did not have substantial participation backing it up, with flows on screen primarily driving the price strength. However, price action suggests we may have seen short covering by players. Meanwhile, the OTC market was quieter, with majors short covering and trade houses becoming less active.
Dubai Market Report – Back to Basics
The Brent/Dubai complex saw a bullish shift with May'25 Brent/Dubai surpassing -$1/bbl for the first time since mid-March. In contrast to flat price, differentials were unresponsive to OPEC+ speeding up its oil output hike. The bullish catalyst was Aramco cutting its May OSP to its lowest level in four years. Short covering flows from trade houses and funds exacerbated the upwards move.
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