Brent trades up to $97/bbl as traders weigh prospect of Iranian retaliation

With Dec’26 becoming the front-month contract, traders are weighing the restoration of shipping through the Strait of Hormuz against the prospect of Iranian retaliation against Gulf oil infrastructure, given the lack of diplomatic breakthrough with the US. Mediators are making a renewed push to advance a deal between Iran and the US, where an official said there was progress but the parties continued to haggle over the sequencing of the next phases of the agreement. In other news, Iraq's average daily oil exports in September were 2.65 mb/d, including 250kb/d barrels per day via Turkey's Ceyhan port, an Iraq Ministry of Oil spokesperson told Reuters on Wednesday. Russia’s Black Sea diesel and gasoil shipments fell to zero for the first time on record in the week to 24 September, according to S&P Global Commodities at Sea data, as a nationwide export ban has continued to hammer trade flows from the major global producer. Chile’s Bio Bio refinery will undergo 40 days of maintenance from 1 October, taking diesel-producing units offline and potentially worsening the regional diesel crunch as the US weighs export restrictions. Finally, the Dec/Jan’26 and Dec/Jun’27 Brent futures spreads are at $2.50/bbl and $10.20/bbl respectively.

Very choppy morning in Dated with strong initial DFL selling, before we bounced back. Nov DFL traded down to lows of around $0.33 Dated to Lead ($2.65/bbl on the DFL) and selling of Nov Dated vs Feb ICE. However we did see buying of 2-6 Nov 3-week at $3.1/bbl and 2-6 Nov v Cal Nov bid at $1.8/bbl. Further down the curve saw some buy side interest in Jan DFL and Q1'27 DFL, as well as paper on both sides of Q3'27 DFL.

This morning in Brent/Dubai we opened higher, with refiner buying of Oct and Nov B/D, and major buying of Nov Dated/Dubai. The Oct B/D moved up from -$2.9/bbl to highs of -$1.55/bbl during the window. However post the window there was Middle Eastern refinery buying of Oct/Nov Dub. The Oct/Nov Dub spread had traded very weak into the window, down from $5.5/bbl to $4.85/bbl, but fully reversed this post window, trading back up to $5.55/bbl. With this move, the Oct B/D reversed some of its move higher, trading back down to -$2.3/bbl. There was continued trade buying of boxes, Nov/Jan and Feb Jun boxes both bid. Quarterlies were quieter, some bank buyside interest in Cal'27 and Cal'28.

380 spreads strengthened this morning, with Oct/Nov trading up from $40.50/mt to $41.00/mt during the window and then continued to strengthen post window to $43.25/mt, Nov/Dec traded between $27.50/mt and $28.00/mt. Oct 380 crack saw less volume than usual and was rangebound trading between $3.55/mt and $3.75/mt. Barge spreads saw little traded, Oct/Nov and Nov/Dec traded at $15.00/mt and $15.50/mt respectively, Oct Barge crack was also thin and traded between -$9.85/bbl and -$9.70/bbl. Oct 380 E/W has been implied higher from $84.25/mt to $87.75/mt.

It was a relatively thin start in Sing 0.5% this morning, spreads opened lower this morning but strengthened toward the end of window and continued post window, cracks were stable. Oct/Nov opened $1.25 lower at $34.50/mt, it traded back up to $35.00/mt during the window. Nov/Dec was somewhat choppy it traded down a dollar in the early morning to $33.00/mt and traded between here and $33.50/mt, then got offered down on screen down to $32.50/mt in the window, post window real buying has come in and bid it back up to $33.50/mt. Oct Sing crack was very thin until after the window where it was bid up on screen from $23.65/bbl tp $23.90/bbl, Nov Sing crack saw decent volume traded particularly pre window where it traded down from $20.65/bbl to $20.10/bbl, it then rebounded during and after the window to $20.55/bbl. Euro complex was very illiquid this morning, Oct/Nov and Nov/Dec have traded once at $11.50/mt and $12.00/mt respectively. Oct Euro crack has been illiquid but volatile, trading up from -$1.05/bbl to $0.00/bbl, it then traded back down to -$0.70/bbl in only 32kb.

This morning in distillates, Sing gasoil spreads were well bid, with Oct/Nov trading from $4.3 up to $4.65/bbl. EW saw selling initially down at -$120 before turning bid, trading up to -$117.5/mt end window. Kero spreads were better supported, pushing Oct regrade from -$2.50 trading to -$1.85/bbl bid last.

Prompt ICE gasoil spreads firmed overall, with Nov/Dec trading from $56.0 up to $58.75/mt, while Nov cracks firmed from $77.5 up to $82.5/bbl.

This morning in Gasoline, 92 MOC well bid with prompt EW strong, seeing Oct EW rally up to -$2.4/bbl end of window, with buying in Q1 EW from a trade up to -$5.15/bbl. 92 spreads better bid this morning with refiners and some majors buyside, seeing Oct/Nov rally into end of window with lack of interest sellside, seeing Oct/Nov trade to $12/bbl end window with the Oct/Nov/Dec fly strengthening from $3.5/bbl to $3.75/bbl this morning.

This morning in naphtha was strong overall, with MOC balanced and cracks, spreads, and front E/W / boxes all better bid. MOPJ firmed, with Oct cracks rising from $0.90/bbl to $1.30/bbl, the Oct/Nov roll moving from -$0.10/bbl to $0.30/bbl, and Q1 trading at -$1.7/bbl; spreads strengthened versus last night, with Oct/Nov up $2.50/mt to $24/mt and Nov/Dec up $2/mt to $23.50/mt, while Dec/Jan was $21.50/mt. E/W was bid, with Oct up from last night’s $62/mt to $64/mt and the Oct/Nov box firming from $0.50/mt to $1.50/mt, while Q1 was at $46.50/mt. NWE naphtha also moved higer, with Oct cracks opening up $0.90/bbl to -$5.70/bbl, the Oct/Nov roll improving to $0.20/bbl from flat, and Q1 at -$6.80/bbl; spreads were firmer, with Oct/Nov implied at $23.50/mt, Nov/Dec at $22/mt, and Nov/Jan at $35.50/mt from $33/mt at open.

This morning in NGLs, FEI opened printing around $840/mt before rallying to $850/mt. This drove Oct/Nov FEI higher from printing $34/mt pre window up to trading $36/mt by the close. As a result, of a stronger FEI price, Nov FEI/CP also rallied to $174.5/mt up around $5.5/mt from printing $169 pre window and trading $171/mt and $173/mt on screen even with the curve steepening in the front. A stronger MOPJ this morning led to the front FEI/MOPJs to give back some of the gains from yesterday. Oct FEI/MOPJ printed -$25/mt versus highs of -$18/mt pre-window. There was also interest in long end FEI/MOPJ with buying in Cal'28 at -$78/mt. There was some Arb selling in the front with Oct LST/FEI stepping down from -$376/mt to -$381/mt trading at -$379/mt intra window. Nov LST/FEI also traded at -$352/mt before falling to -$354/mt. FEI ended the session trading $852/mt on screen.

U.S. 30-year bonds make another new high, 5.62%, the highest since 2002, but the 2-year has plateaued, with the 28th July 2027 OIS (4.76% pricing 89bp hikes) potentially topping as energy prices ease.

Treasury Secretary Bessent said yesterday, “we are in a very illiquid period. The market is moving quickly… I can’t set the equilibrium price.” This is the same man who weeks earlier told the market “I am the house now. I have asymmetric information. Bet against me if you want.”

Conference Board released data showing US consumer confidence at a 12-year low and Trump administration data indicating job openings falling to a five-month low. Chief among American worries is, predictably, the affordability crisis. Wall Street is not Main Street!

China official manufacturing PMI (September): 50.1 (expected 50.1, prior 49.8)

GBPJPY sits on critical support, as does EURJPY.

Bank of America data shows that private client cash holdings have fallen below the levels recorded ahead of the 2007 peak - prior to the Global Financial Crisis - suggesting that despite a meaningful decline in retail purchase volumes, investors remain heavily allocated to risk assets with limited dry powder on the sidelines.

Another equity correlation currently out of line. The differential between credit spreads and equity volatility ($VIX) is one of the widest I've seen in a long time. Credit spreads typically front-run equity volatility.