Brent drops $3.50 after new US sanctions

Oct'26 Brent crude futures reached daily resistance at $92.80/bbl at around 03:30 BST and dropped to $89.30/bbl at 11:20 BST (time of writing). US launches “Operation Economic Outcast”: Treasury sanctioned 60 individuals, companies and vessels linked to Iran’s oil smuggling, military procurement, missile/nuclear programmes and cyber activity. But the bigger change is the expansion of secondary-sanctions pressure: Washington is warning foreign governments, banks and companies that continuing business with Iran could ultimately cost them access to the US financial system. Bessent described the objective as “economic asphyxiation” and said no country is beyond the reach of US sanctions. Ukraine hit multiple Russian targets overnight; Kyiv reportedly struck the 125kb/d Afipsky refinery, where a fire was reported, alongside a MiG-29, two Black Sea vessels and a rocket-fuel plant in Rostov. Putin signed a decree allowing the state to temporarily take control of critical private infrastructure if owners fail to adequately protect or restore it after attacks. The measure covers fuel, energy, industrial, transport, communications and logistics assets, with the Kremlin insisting it is not formal nationalisation. An oil tanker was struck and disabled by an unknown projectile in the Strait of Hormuz, around 9 nautical miles northeast of Ash Shishah, Oman, with the impact damaging the engine room; all crew were safe. Finally, the Oct/Nov’26 and Oct/Apr’27 Brent futures spreads are at $1.38/bbl and $9.04/bbl, respectively.

This morning in Dated, we saw strong selling of Sep/Oct with the DFL roll trading down to -$0.28/bbl. We saw selling in Sep structure with 1-4 Sep 3w sold at $0.30/bbl early on then as well as sell side interest in cal Sep 21-25 Sep and cal Sep 5-9 Oct which traded at $1.26/bbl. 14-18 Sep 1w was sold at $0.22/bbl, 21-25 Sep cal Oct was also sold at $1.95/bbl and 12-16 Oct 2w offered at $1.15/bbl. Further down the curve we initially saw buying of Q127 DFL before a major came in selling down. We also saw strong Sing bank buying of Cal'28 DFL again.

A weak start to the day on HSFO, which then continued as the day progressed. Most of the selling was localised in Singapore. Sep/Oct 380 traded down to $36.75/mt while the E/W came under the most pressure trading down to $69.00/mt. Barge cracks were stronger due to E/W weakness with Sep buying up -$10.75/bbl. Barge spreads were largely unmoved with Sep/Oct Barges trading similar levels to last night around $11.25/mt.

Sing 0.5 opened a touch weaker this morning. Spreads traded lower on lower crude with the crack followed suit trading as low as $18.50/bbl from $19.20/bbl. As mentioned spreads were also weaker with Sep/Oct taking the brunt of the selling trading down to $33.25/mt. The Sing crack in Sep did rally post window trading back up to $19.00/bbl. Euro spreads saw more liquidity this morning than usual as E/W boxes were fairly liquid. Sep/Oct Euro traded in fairly decent size around $23.00/mt and $23.25/mt while the Euro crack was bid up on screen up to $6.45/bbl.

This morning in distillates, Sing gasoil spreads were well bid initially before seeing selling post window, with Oct/Nov trading from $5.00/bbl up to $5.15/bbl before coming back to $4.80/bbl last. Front E/W was bid up initially to -$78/mt before selling down to -$87/mt last. Kero spreads remained offer side in the deferred, pushing Dec regrade down to $2.40/bbl.

Prompt ICE gasoil spreads firmed into end window before weakening since, with Sep/Dec trading from $124/mt up to $128/mt before coming back to $125/mt last, while the Oct crack firmed to $71.50/bbl.

This morning in Gasoline, MOC better offered with buying interest in the Sep/Oct 92 MOC roll from trade. E/W continues to weaken this morning, seeing Sep trade down to lows of -$19.85/bbl post window with small buying in Oct E/W from a fund at -$10.30/bbl. RBBR stronger but prompt arb continues to weaken with EBOB staying better supported, seeing Sep arb getting hit -5.7c/gal with selling in the Q1 Arb at 26.1c/gal from a trade house.

This morning in naphtha was mixed and choppy, with MOC better bid and the market opening supported by some MOPJ flat-price buying from petchems, though Europe spreads came off with crude while real interest kept MOPJ firmer. MOPJ cracks strengthened, with Sep moving from $0.25/bbl to $0.90/bbl bid, while spreads held relatively fixed, as Sep/Oct moved from $23/mt to $24/mt and Sep/Nov traded at $49/mt. E/W rallied as well, with Sep moving from $46/mt to $51/mt, Q1 27 around $37/mt and the Jan/Mar box trading at $5.50/mt. NWE naphtha cracks were stronger, with Sep moving from -$5/bbl to -$4.50/bbl, Q4 26 around -$5.25/bbl and Q1 27’ around -$6.50/bbl, while spreads softened in the front as Sep/Oct came off from $21.25/mt to $19.75/mt, Oct/Nov was around $22.50/mt and Nov/Dec moved from $20.25/mt to $19.50/mt.

This morning in NGLs, FEI spreads were better bid to start the day. Sep/Oct FEI opened at $33/mt before strengthening to $35/mt, and Nov/Dec was bid up to $19/mt with Major on the buyside, returning to the same level as last night’s close. Dec/Jan FEI also had good buying across the morning at $16/mt. Sep LST/FEI traded at -$375/mt, before strengthening to print -$371/mt as the phys FEI window was well bid. Q4 LST/FEI was bought at -$313.50/mt, $2 stronger than yesterday’s closing level. There was also buying of Sep LST/NWE at -$159/mt, and Sep FEI/CP traded down to $138/mt having printed $141/mt to start the day. End window on screen, Sep FEI flat price was hit at $747/mt.

Druckenmiller on Bessent's ‘actions’:
"I have spent five decades trading on a simple premise: Markets aggregate information no committee possesses, and prices are how that information reaches decision makers. The long-term Treasury yield is the most important price in the world. It is also the only fiscal disciplinarian the U.S. has left."

"If the 30-year must trade at 5.5% to clear, that isn’t a crisis. It is an invoice. Then do the only thing that durably lowers long-term yields: address the primary deficit."

Gold rallies another 1%. Chinese gold demand is surging back, with open interest in Shanghai Futures Exchange gold futures spiking to nearly 400,000 lots - one of the largest two-day increases in five years - suggesting aggressive new long positioning rather than simply rolling existing contracts. (Goldman Sachs)

Shares of Newmont, the world’s largest gold producer, are up 45% in just four weeks - one of the biggest rallies in the company’s history.

The Bloomberg Commodity Index has SURGED by a STAGGERING 38% over the past year.

Trump has escalated the U.S.-Canada trade war by threatening to double auto tariffs to 50% and impose new parts tariffs from January, following a breakdown in negotiations that already triggered a 50% levy on Canadian furniture, plastics and electrical equipment - with Canada vowing retaliation, the Canadian dollar sliding, and economists estimating up to 90,000 Canadian jobs at risk if the measures persist.