Edge Updates
Dated Brent Report – Last Chance D(ated)
While outright values suggest that the physical market is tight, whether or not this translates to a bullish market is a subjective matter. Notional values are high, but CFD rolls continue to roll down weekly. The 21-25 July 1-week roll is down from $0.50 to $0.10/bbl, and the 28-01 Aug 1-week roll is down from $0.45 to $0.30/bbl. The culprit? A relentlessly strong physical market. The market is implying forward differentials at stratospherically high levels, so even if the physical strengthens, it is insufficient, weakening the CFD rolls. As it stands, early August weeks are pricing above $1/bbl. The 21 July physical window was constructive, with the physical rising from $0.69 to $0.77/bbl, but there are still ways to go.
Dated Brent Report – Rolling Down
The geopolitical risk premium may have faded, but the continued rally in Brent structure highlights the market's resilience. Futures spreads have been on a steady upward trend since the beginning of May, with Sep/Oct Brent strongly backwardated above $1/bbl (time of writing). The market has fundamental strength, with strong refinery margins that are a driver of crude demand. Resurgent distillate strength took the market by storm, but something has to give. Product cracks would eventually correct lower on account of higher production. At the same time, hot temperatures across Europe and heat-related disruption would force refiners to cut their run rates, tempering crude demand. Nonetheless, Forties saw buying from Chinese players (Petroineos and Unipec) in the physical window, taking advantage of momentary Dated weakness and Dubai strength to fix arbs into Asia potentially.
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Dubai Market Report – Summer Lull
While the Bal-Jul’25 Brent/Dubai briefly ticked up from -$1.20/bbl on 1 Jul to -$0.65/bbl on 3 Jul, the contract sold off to a low of -$1.46/bbl on 15 Jul. Similarly, the Aug’25 Brent/Dubai weakened from -$0.09/bbl on 3 Jul to -$0.45/bbl on 10 Jul
Dubai Market Report – Back to the Status Quo
The Dubai market has largely returned to normality as geopolitical risk unwinds. As per usual, the Strait of Hormuz didn't close this time, although there was noticeably more market anxiety. The forward curve is being heavily pressured, with Brent/Dubai boxes aggressively selling off. On the first day of July pricing, the Jul'25 Brent/Dubai fell below -$1/bbl, while the Jul/Aug'25 box came off to -$0.95/bbl, which marks an extreme contango structure. Aug'25 is following suit and was the next contract to fall below flat. Another notable drop was Q4'25/Q1'26, which fell from $0.05 to -$0.15/bbl. The market has largely disregarded the prospect of OPEC+ supply hikes, interpreting it as existing overproduction being formalised. The combination of the market buying Cal26 and selling front boxes would have put participants comfortably in the money. Here, trade houses and majors were the main players. Previously, we noted that refinery sell side hedging flows in Cal26 had distorted Brent/Dubai. Now that these flows have subsided, this distortion has left a vacuum conducive to a mean reversion. There is greater conviction in the downside for Brent/Dubai boxes as these flows are more speculative, whereas refinery flows are more price-agnostic.
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