The Officials

Price war? Battle for market share? A crack of the whip? The return to realism? Explanations for OPEC’s decision to consecutively accelerate production cut unwinds have been swirling. The market certainly reacted and the Asian session dropped to $59 on the open and just failed to regain the $60 handle by the close, coming in at $59.96/bbl. In difference to the previous announcement, however, this one was almost baked into the market consensus.

The disruptors! OPEC+ brought forward its meeting to tomorrow! The market didn’t expect that and Brent futures fell to below $61 on the reports. Is it just a coincidence that this puts the meeting on the weekend, outside of trading hours, when any market impact can be tempered? Looks like it to us… announcing a change on the weekend will give the market time to digest the impact and hopefully avoid an overextension in reaction. We’re also hearing reports that delegates are already discussing their decision. To cut to the chase, the cats are fighting and anxious about the consequences of their announcements and collapsing prices.

While on the surface globally crude seems hands off, in Dubai it’s time to flip the script! Gone are the days of early-month caginess and jockeying for position in the physical window. PC and Vitol (and Gunvor) reversed roles and gave us a neck ache. Seller becomes the buyer and the other way around. This’s just a reflection of spread trading. Where you sold one month and bought the other one. Sadly, both Vitol and PC have to play the reverse role when the month expires and rolls into the new one.

Brent rolled… out of bed and fell to the $60 floor! Yesterday afternoon’s pre-expiry selloff brought July Brent down to hover just
above $61 and it dropped on the open this morning. Brent slipped as low as $59.30 around lunchtime but fought to regain the $60
handle and even rose beyond $61.50 by 15:00 BST. A trader said confidently, this is the floor! After the June/July Brent spread was
so strong for so long, the July/August spread that’s now taken the position of prompt spread is languishing near 30c.

The market is gearing up for war, on the oil pricing battlefield. The Officials heard that the Saudis are preparing for a 1-2 year price war, while other reports suggest they are fed up with carrying responsibility for OPEC cuts.
The May DFL sold off pretty aggressively yesterday to dip under 60c and it kept going today, falling to below 40c just after the window. Today’s North Sea window followed much the same pattern as yesterday’s: Exxon and Gunvor came in to offer Midland again, each with a cargo at May 15-19 and May 28-June 1 at +$1 and +$1.55 over Dated, while BP bid for several Johan Sverdrup cargoes. Eni made an appearance for the first time in a while, offering a May 26-28 Forties cargo at Dated +$0.40. A broader selection up for grabs, but no buyers were tempted forth to take advantage of the menu. With such lacklustre buyside interest, the physical diff dropped again to 12c.

We feel like we always open the editorial with “what a month”, but at the moment each month seems to bring more and more excitement in markets. But boy has April been a long month, despite only having 30 days. That’s because it’s been so jam packed with major events and news! Tariffs, geopolitical strife, a rollercoaster Dubai spot market – see more on that below – we’ve been through a lot of ups and downs this month, rather like the markets as a whole.

It’s been a long, steady slide for flat price in the final week of April, from around $68.50 on 23 April towards the mid-$64 level today. Despite this $4/bbl decline in under a week, the front spread has remained solid throughout and even stretched to $1.14 yesterday before coming off to 95c by today’s European close. But there’s a divergence emerging between the physical market and futures. While futures retain strong backwardation in the prompt, the recent physical strength we’ve seen in the North Sea has dissipated: the physical diff has plunged to 15c, from $1.17 last Wednesday and the May DFL tumbled from above $1.10 yesterday to below 60c today.

After the previous week’s sharp drop, the week ending April 25th saw some signs of reversal in exchange-traded futures volumes for longer tenors. As the end of the month and June Brent expiry approach, exchange-traded futures volumes across front-month contracts fell with the clear exception of WTI. By contrast, as shown in our momentum table, all contracts for July and August either showed modest decreases or jumped significantly. Brent and WTI futures were the clear standouts, with volumes growing by 30-60% for these tenors.

The Dubai buyside is a ghost town. Once Vitol had a couple of bids hit by PetroChina to complete a convergence – for which PC nominated a Dubai cargo – the tradehouse disappeared entirely from the window. The final bid was placed over 12 minutes before the window’s close and the remainder was a sea of PC, Hengli, BP and Reliance offers. By the end, Dubai partials had fallen to $64.64/bbl, down from $66.85/bbl yesterday and the physical premium got absolutely crushed – down to just 59c! Since Wednesday, the premiums dropped by $1.16! This is now the weakest physical premium since 29 November – since Totsa took the bull by the horns and upended the Dubai market.

The lights are out! Moeve (formerly Cepsa) said it had halted operations at its Spanish refineries as they have no power to make them run. And Repsol had the same problem. You can’t even pay for anything! Contactless payment methods are apparently not working due to the power outage. Cash is king! People even got stuck on a rollercoaster. Carnage!

Look at the Dubai partials to prompt Brent futures spread! Dubai has fallen! It’s tight as the two benchmarks battle for the lead like a pair of race cars edging for the lead. On Friday, Dubai partials held a 63c premium over Brent futures but today that has plummeted to just 2c! Excluding a brief flip on 4 March, this is the weakest Dubai has been relative to Brent since 19 December 2024!!!

Sometimes songs encapsulate the reality show we are in. And even the name of the group, ‘Lost Frequencies,’ fits the narrative. We copy some of the lyrics: ‘Stop claiming what you own and think about the show: “We’re all playing the same game, waiting on our loan. Decisions as I go, to anywhere I flow. / Sometimes I believe, at times I’m rational. I can fly high, I can go low. / Today I got a million, / Tomorrow, I don’t know.”

An extremely unusual event happens, common sense prevails! China intends to exempt certain NGLs and petrochemicals from its retaliatory tariffs against the US. Ethane, polyethylene and propylene are now exempt, giving some hope that propane could escape too. A Chinese source confirmed to The Officials that “PE [polyethylene] and ethane from the US are exempted, while propane is not.” The ethane exemption will help those Chinese plastic factories – but propane was the bigger of the two in terms of US exports to China at nearly 400 kb/d in December and January, while ethane was only 260 kb/d in those months. But, as one Chinese source commented to The Officials, China and US rely on each other when it comes to ethane. So, with no China demand, there is no outlet for US ethane and China has no ethane resources. Also, in Asia 2.70 we referred to the two new ethylene crackers expected to use naphtha as primary feedstock but those taking in ethane will be breathing a sigh of relief. Meanwhile, Trump said Xi had called him, after waiting by the phone for some time. And we like them talking, as it helps solve problems. Hopefully, they can keep chatting and sort the whole mess out. If the trade relationship hasn’t been entirely soured by last month’s events, perhaps these will resume as usual…

There’s no lifting the foot off the gas in the North Sea, as Trafi picked up yet another trio of cargoes. But this time it’s broadened its palate and picked up one Forties from BP – a cargo for 22-24 May at Dated +$0.85. The main dish was, however, still Midland, of which Trafi collected two from Gunvor for 23-27 and 24-28 May, both at Dated +$1.85. Nine Midland cargoes in 3 sessions, plus one Forties for good measure… that’s 7 mil bbl – equivalent to 3.5 VLCCs! Ekofisk was back on the menu too, as Mitsui bid for 12-14 May at $2 over Dated, whereupon Shell swept in to hit their bid. The physical differential slipped to $1.13.

Divorces are rarely clean breaks and Kazakhstan’s policy split from OPEC has already been reined in. Kazakhstan isn’t in an easy position; while it can drill as hard as it likes and IOCs can extract enough oil to fill the Caspian Sea, Kazakhstan depends on neighbours for pipelines and export facilities. Remember the spat around the Caspian Sea SPMs that Russia temporarily blocked a couple of weeks ago! Suitably chastised, after his bombastic comments about prioritising national interests above OPEC’s famed disciplined compliance, he quickly ate humble pie and mumbled about commitment to the common good.