Brent trades up to $103 as Houthi-Saudi conflict intensifies

The Houthi-Saudi conflict is intensifying, where the start of full-scale military operations in Yemen was announced to retake Houthi-controlled areas, while 100,000 Yemeni troops are to be mobilised under Saudi command. Saudi Aramco cut the OSP for Arab light to Asia by $3 to -$5/bbl for November. A strike by more than 160 offshore workers at US energy company Apache this month could disrupt the UK's North Sea Forties pipeline, a major conduit for UK oil and gas supplies, the Unite labour union said on Sunday. Taiyo Oil CEO Takahiro Yamamoto said Japan should continue sourcing over 90% of its crude from the Middle East in normal times, arguing diversification is costly and Japan can secure alternative supplies within about three months during a crisis. Iran's Oil Minister Mohsen Paknejad has resigned for personal reasons, and Hamid Bovard, chief executive of the government-owned National Iranian Oil Company (NIOC), will be acting minister, state media said on Sunday. Saudi Arabia and the UAE are expected to cooperate with Asian countries on strategic oil stockpiles, with Japan providing financial and technical support and potentially facilitating expanded crude supplies or priority deliveries during emergencies. Iraq’s state tanker company plans to expand its fleet to ship crude beyond the Strait of Hormuz, after its first 2mb VLCC cargo completed the route, giving SOMO greater flexibility to reach buyers and capture potentially better pricing. Finally, the Dec/Jan’26 and Dec/Jun’27 Brent futures spreads are at $3.51/bbl and $13.25/bbl respectively.

Quieter morning in Dated with Nov DFL trading between $4.7/bbl and $5.15/bbl. We saw some buying of 5-9 Oct v Cal Oct at $9.2/bbl whilst we also saw a seller of Cal Oct vs 14-20 Oct offering $3.00/bbl. Also saw sell side interest out of 5-9 Oct 3-week offered at $18.00/bbl and sell side interest in 19-23 Oct 1-week. Further down the curve saw a major selling Dec and Jan DFL and a bank selling Q1'27 DFL.

This morning in Brent/Dubai was very quiet. We gapped higher overnight, Nov bd opening at -$1.5/bbl. There was smalls selling of Nov and Dec B/D. Towards the end of window Nov B/D sold off to -$1.85/bbl. The Dubai spreads had not interest OTC and traded in a large range. The Nov/Dec Dubai spread initially opened lower around $3.5/bbl, traded weaker into the window down to $3.3/bbl, but rallied post window up to $3.8/bbl. There was smalls bank interest to sell Q2'27 B/D. Boxes were also very quiet, smalls interest to sell Dec/Jan B/D around -$0.22/bbl.

It was a thin start to the week in Fuel due to Chinese holiday, Sing products all came in stronger while Euro remained stable. Sing 0.5% spreads saw very ittle volume, Nov/Dec opened 75c higher at $33.75/mt and then traded up to $34.00/mt post window, Dec/Jan is yet to trade. Nov Sing crack opened at $21.20/bbl, it was then aggressively bid up to $23.70/bbl in the window, this strength continued post window getting bid up to $24.00/bbl. Euro 0.5 was very illiquid, prompt spreads have yet to trade and Jan/Feb traded at $12.00/mt, Nov and Dec Euro cracks have traded at -$1.55/bbl and -$0.75/bbl respectively. Nov 0.5 E/W has been implied 5 dollars higher to $163.50/mt but has yet to trade.

380 complex saw better volume traded this morning but was still thin, spreads and cracks strengthened. Nov/Dec 380 opened at $37.75/mt but was quickly bid up OTC to $39.00/mt where it traded up until the window, during the window it was bid up to $39.50/mt and post window it briefly traded up to $39.25/mt before selling down to $39.25/mt, Dec/Jan has traded at $23.00/mt. Nov 380 crack opened nearly a dollar higher at $2.00/bbl, it was then bid up during the window to $2.35/bbl and it is currently trading at this level. Similar to Euro 0.5, Barge complex was illiquid, Nov/Dec traded at $15.50/mt and Dec/Jan at $11.50/mt. Nov 380 crack has strengthened from -$11.90/bbl to -$11.60/bbl.

This morning in distillates, Sing gasoil spreads were offered, with Nov/Dec trading from $5.30 down to $5.0/bbl. Nov EW also saw sell side interest, trading from -$89/mt down to -$94/mt. Regrade rolls saw buying in the front, with Nov/Dec well bid at -$0.50/bbl. Prompt ICE gasoil spreads were rangebound, with Nov/Dec trading between $42 and $45/mt, while Nov cracks opened higher before trading sideways at $72.5/bbl.

It was a weak morning in gasoline, with the East leading the move lower. Nov 92 MOC was balanced to offered and Nov 92 cracks sold off from Friday's close of $27.98/bbl to $25.84/bbl by the end of the window. The weakness in 92 dragged Nov EW down from -$4.10/bbl to -$5.10/bbl. The 92 curve came off with it: Nov/Dec fell sharply from $9.50/bbl to $8.50/bbl. The Nov/Dec/Jan fly was offered early, trading down to $3.65/bbl from $4.00/bbl, before firming back to $3.85/bbl into the close of the window. EBOB was softer, but less so than the East. Nov cracks eased from $32.07/bbl to $30.86/bbl, the Nov/Dec crack roll slipped from $6.22/bbl to $5.78/bbl, and Nov/Dec weakened from $75.50/mt to $72.00/mt. Across the Atlantic, the Nov arb was better bid, rising from 0.20c/gal to 2.00c/gal and adding pressure on front EBOB.

This morning in Naphtha was very quiet amid the Golden Week holiday in China, with MOC flat bid. MOPJ was mixed: Q1 cracks fell from -$0.95/bbl last night to -$1.15/bbl, while Nov rose from around $1.50/bbl to $1.70–1.75/bbl. Front spreads opened bid on propane strength before turning better offered as Brent spreads weakened, with bal/Nov down from $28.50/mt to $27/mt and Nov/Dec from $29/mt to $28.50/mt, while Dec/Jan held at $27.50/mt. E/W softened, with Nov down from $66.25/mt to $65/mt and the Nov/Dec box around $.25/mt on legs. NWE naphtha was also softer: Nov cracks traded up to -$5.50/bbl before ending around -$5.70/bbl versus -$5.75/bbl last night, while Q1 eased from -$6.50/bbl to -$6.60/bbl. The Bal Oct/Nov spread firmed from $28.50/mt to $29/mt, with the rest of the curve illiquid.

This morning in NGLs, FEI opened strong with Nov FEI trading at $862/mt pre window before closing at $882/mt. This drove front end spreads higher with Nov/Dec FEI trading at $41/mt versus trading at $40/mt pre window. Dec/Dec'27 FEI also traded this morning holding firm around $217/mt trading multiple times at that level. There was significant buying interest in MOC contracts pre close, coming in at $882/mt. FEI/CP continued to move higher today off higher crude with Nov FEI/CP trading at $216/mt and $218/mt throughout the window. The Arb sold off slightly this morning with Nov LST/FEI trading at -$395/mt versus printing -$390/mt pre window. However, Nov LST was also strong this morning trading at 92.25c/gal versus 91c/gal print pre window. There was also some C4 CP trading this morning trading $706/mt post window up from $695/mt pre-window. This drove up the Nov/Dec spread up to $38/mt versus $36/mt print.

2-year yields have topped, with 82% chance FED remains on hold at the next meeting on 28th Oct. EURUSD continues to fall to a 17-month low on French bond concerns as France-Germany 10Y spread is less than 40bps away from taking out sovereign debt crisis highs. DXY continues to trend higher, as does the U.S. 2s/10s yield curve, now at 47bps.

The September employment report was one for the doves, +29k (est +90k). Jobs growth was revised down, wage growth remains weak, and unemployment ticked up to 4.2%.

The 3mth correlation between the S&P 500 and its equal-weight counterpart is just 0.63, vs a 0.93 avg since 2011. In Sep, it dipped below 0.60, the lowest in the series. The AI boom is masking the pain beneath the surface.

Some unusual things are happening beneath the surface of the S&P 500...

The index remains near record highs, but individual stocks are behaving unusually independently of one another. None of this is necessarily bearish on its own. But taken together, it points to an unusually fragmented market beneath a relatively calm index ... something worth monitoring. (Source, Chris Cain)

* 29% of S&P 500 stocks have negative market betas, the highest share since at least 1995 vs. a historical median of just 1.6%.
* 90% of individual-stock variance is idiosyncratic, a 99th-percentile reading, suggesting stock-specific forces are dominating marketwide forces.
* Individual stocks are much more volatile than the index: average constituent volatility is 34.6% vs. just 12.3% for the S&P 500.
* Pairwise correlations are near historic lows: just 0.10, a 4th-percentile reading.
The ongoing AI capex boom is shaping up to be the largest on record