The Officials

Chinese crude buying is back big time. Following the earlier fifth quota for 58 mil bbls, Saudi allocations also jumped by close to 10 million bbls! Fasten your seat belts, this baby is going for a ride! The previous Saudi Cyber Monday OSP price cut worked its magic and now everyone wants more Saudi crude! The 80c reduction brought the customers in mass and they asked for even bigger volumes than allocated. The Saudis got some love back from China and allocations were upped. But the UAE cut supplies to Asia! Saudi December allocations fell way down to 36.5 mil bbls, but they surged to 46 mil bbls for January. As usual, Rongsheng’s going to be rolling in it with the biggest allocation, 16 mil bbls, while Unipec and PetroChina also got allocation bumps. Shandong got an allocation, 2 mil bbls, the first since September. But some were disappointed and wanted more. Sources say Unipec asked for 14 mil bbls but only got 8 mil! That’s a big difference.💔 We also heard other physical barrels are moving; our sources say WAF is flowing and the overhang went down from 100+ mil bbls to around 70 mil bbls. So, things look bullish as they do when people buy more than they were.

The morning’s march towards the upper $73 range ran out of steam and quickly retraced much of the gain, falling back towards the mid-$73 range by mid-afternoon and then dumping firmly back into the $72 range! But then the headline that Israel was preparing to strike Iranian nuclear sites saw prices jump back up to near $73.80/bbl. According to one trader, “Wingy vol popped”. That’s trader speak for surging bets on volatility.

The holiday might be awkward in some households, none more so than in the uncomfortable marriage between Austria and then Russia. OMV and Gazprom have broken up. OMV terminated its natural gas supply contract due to “multiple fundamental breaches of contractual obligations by Gazprom Export”. The Austrian Chancellor accused Russia of attempting to blackmail Austria through its energy resources. In short, OMV was trying to claw back money and Russia stopped delivering gas. Yeah, contracted terminated 😊 never mind the people that need the gas

We’re back to convergence central. Vitol declared an Oman, Exxon declared an Upper Zakum and PetroChina declared a Dubai. You’ve got one chance to guess who they sent it to. Yep, every single one went to Totsa. Yet again it’s the French vacuum cleaner hoovering them up. Whatta lotta Totsa. Indeed, Totsa was all over it in the window, bidding incessantly. The French were also lifting offers from a great range of sellers – BP, Phillips, Exxon, Trafi… whoever they can find and give a battering. Equinor was among them, though it was much less enthusiastic than in its North Sea offering in the past couple of weeks. As far as we could see, no other buyers were tempted, facing of Totsa’s prolific aggression. That didn’t prevent the likes of Mercuria and Hengli bidding, even if they didn’t get a reward for their efforts. After Totsa’s goliath buying efforts, the Dubai physical premium jumped to 94c, the strongest we’ve seen since late October! Meanwhile, prices kept going up in Asian trading and Brent flat price troubled $74/bbl by 09:00 GMT. It closed the Asian session at $73.79/bbl.

Trafi is still hitting the buffet car and was after a range of Midlands. It bid for 23-27 Dec at $2.20 over Dated, Dated +$2.15 for 28 Dec-1 Jan, and also for 2-6 Jan. Equinor hit Trafi’s 2-6 Jan Midland bid when it rose to Dated +$2. Trafi also went for an Oseberg, which Equinor was offering. Equinor offered its 23-27 Dec Johan Sverdrup down to $1.30 under Dated but nobody wanted to pick it up. After the interest in Trolls yesterday, Equinor offered another today, which Totsa lifted at Dated +$1.90 for 30 Dec-1 Jan. Totsa was also happy to take a 7-9 Jan Ekofisk from the Norwegians at $1.20 over Dated.

We’ve got used to Asia selling and Europe buying. But today started the opposite to usual; Asia boosted prices to significantly retrace the slip late yesterday evening. Brent flat price reached as high as $72.75, briefly. But Europe came in and knocked it back down a peg towards $72.30. The Europeans had a slow start but by 09:00 they were up and swinging, sending flat price back up again! Back to almost $73 in half an hour. Flat price just can’t decide which way to go! But we
have to observed some strengthening on the back of positive Chinese oil import stats. Today’s Dubai window was cagey and many bids and offers went unanswered, being withdrawn after the window’s close. One aspect of the window trading we’re becoming accustomed to is seeing Exxon as the primary seller. Again, it was hitting bids whenever they came up high enough. Most trades were made up of sellers smacking buyers’ bids and buyers only managed to lift a few offers here and there. As ever, Totsa was chucking in plenty of bids and was joined by Glencore and Mercuria. BP also showed up bidding, like Hengli, though the latter couldn’t keep pace and didn’t pick up a partial.

The window was more dynamic than ever! December’s been pretty crazy but today they cranked it up another notch. Bids and offers were flying left, right and centre. Trafi and Totsa were bidding heavily, while Equinor was offering a plethora of grades for yet another session. The Norwegian major was still trying to shift a 22-26 Dec Sverdrup, offering it down to $1.30 under Dated, but found no taker even there. It had more luck with its Midland offering. Once again, Trafi was hungry for Midland and swept up Equinor’s offer of a 5-9 Jan Midland at Dated +$1.95 as soon as the Norwegians lowered that far. That wasn’t enough Midland for Trafi, which kept bidding, looking for a 1-5 Jan cargo at Dated +$2.00 and another 27-31 Dec for the same price. It threw in a bid for a 1-5 Jan Midland at $2 over Dated too.

Oil prices soften as parts of the world burn. It is a free for all fight where every party is trying to grab what they can. Human disaster. The Syrian situation appears to be spiralling. The power vacuum resulting from Assad’s fleeing has seen lunges for influence by numerous parties. Israeli troops have grabbed more of the disputed Golan Heights as Syrian soldiers abandoned their posts in the aftermath, and now Syrian security forces have said the Israelis are approaching Damascus itself. An Israeli military spokesperson has denied the entry into Syrian territory proper and said operations have remained within the buffer zone as a defensive manoeuvre. Other regional powers have condemned Israel’s alleged land grab, but they all have their own interests in the new order too.

Well that didn’t last long. A brief test of $71 ended when markets decided prices weren’t high enough and they quickly pierced the $72 handle, and the Americans kept the momentum going. Feb Brent closed over a dollar up, at $72.41/bbl. Back in the $72-75 comfort zone, as geopolitical risk comes back to the fore, never mind the bearish fundamentals. Last week’s pattern looks set to continue. Equinor is still selling heavily in the North Sea, offering cargoes across grades: Ekofisk, Troll, Oseberg, Johan Sverdrup and Midland were all on the menu today. Trafi was bidding for Midland and, once it had increased its bid to Dated +$2, Equinor made the most of it. That didn’t stop Trafi from continuing to bid for more of the same, raising a 27 Dec-1 Jan Midland to Dated +$2.05. Trafi also went in bidding for Troll and Ekofisk. Eni made an appearance, lifting a Midland from Equinor at $2.05 over Dated. Equinor has really been covering all bases and offering all sorts in December’s North Sea windows so far. Totsa was relatively quiet in this afternoon’s window, only bidding for three Midlands ranging from end-Dec to early-Jan at around Dated +$1.80, after its frantic bidding and buying last week.

As we expected, Saudi Arabia cut OSPs for Asia. They did the minimum we prophesised on Friday, cutting Light grade prices by 80c, while Medium and Heavy each received a 70c chop. Will that be enough to entice back Chinese buyers who had been going to the spot market and looking to other suppliers, such as West African producers in the past month. There could be more competition for China’s attention, however. As the Assad regime crumbles, Iran’s crude exports to its old Syrian ally are set to unwind. TankerTrackers spotted that a tanker set to deliver 750 kb of Iranian crude to Syria did a 180 turn in the Gulf of Suez. The cancellation of exports from Iran to Syria now that Iran’s pal Assad has been ousted will free up around 60 kb/d of crude, which will need a buyer from Iran’s reduced list of customers – more competition for the lacklustre Chinese demand?

THE RUSSIANS ARE BACK!! Watch out North Sea guys, they are coming and are hungry! In the window, Litasco picked up a Midland from Gunvor for 6-10 Jan at Dated +$1.95. Other than that, it was back to normal December service. After the caginess in yesterday’s window, the tantalising trio wasted no time in getting down to business today. No sooner had Equinor offered Forties than Trafi gobbled it up, earning itself a 4-6 Jan at Dated +$1.45. Trafi also got a Ekofisk for 30 Dec – 1 Jan at Dated +$1. Totsa was back with its old comrades, buying a 29 Dec-2 Jan Midland at $1.95 over Dated. Once Totsa had lifted the first Midland from Equinor, the mighty Vikings pulled back and withdrew their other Midland cargo. Evidently, they just wanted to get one off their hands. Totsa wasn’t satisfied with only one Midland, and also collected a 24-26 Dec Troll (a rare find in the window) at Dated +$2.25 and a 20-22 Dec Oseberg at Dated +$2.05, both from Equinor. Equinor was also offering its Johan Sverdrup again, but nobody could work up the interest to take that one off their hands. The North Sea trifecta has dominated the window this week and we’re wondering if they can keep it up deeper into December. BP’s been bullied out after its dip into the Sea yesterday This week we have seen 19 cargoes done, wow!

Just as we said, we are 60s people and prices are softening. Time to grow your long hair if you have any left old guys and for the young buy some flared bottoms trousers. We are almost there. Strangely, physical has been strong, and look at recent activity in Dubai and more importantly in Brent but the line of travel is weak. We saw on TV the Saudi energy minister selling the narrative of why they had to kicked the can down the road and he didn’t look happy. Who would be? As the dust swirls around OPEC’s delay, Brent flat price drifts lower, into the low to mid-$71 range. Hey, the Saudis and OPEC have got to save face. And yesterday at the superbly timed press conference, the Saudis wheeled out more propaganda to support the decision. But they’re clearly keen to pump; they’re investing in new capacity – Aramco just awarded three offshore deals worth over $500 million! For what… not to use it? Unused equipment degrades over time, and incurs maintenance costs, so why bother investing billions to boost capacity if you’re not going to pump it?

More of the same from OPEC at its meeting as it delays unwinding voluntary and collective production cuts. More dilly dallying. More procrastination. What’s new? Well, the leaks are only getting worse as member states get fed up waiting for a release of barrels and jumping the gun. Lots of up and down action ended with Brent at $72.13/bbl at the close. And one source says, it is not a million b/d excess production from the UAE, it is only 400 kb/d. Hahahah! OMG, we had to laugh. The window was another déjà vu, as Trafi and Totsa kept up their aggressive bidding, each one looking for Midland, while Equinor offered both Johan Sverdrup and Midland. In the Midland, the buyers and sellers couldn’t find a middle ground, with quite a wide spread between bids and offers. Trafi and Totsa were reluctant to raise their bids above Dated +$1.75, waiting instead for Equinor to come and meet them. The Norwegians brought down their 21-25 Dec to Dated +$2.20 (rather high in our view) but gave up there and withdrew. Their offering of 26-30 Dec Midland at $2.15 over Dated went unanswered, as did those for Oseberg and Johan Sverdrup. BP also showed up, offering an Ekofisk at Dated +$1.50, but that wasn’t picked up either. We ended up not seeing a single trade – for the first time this month!

OPEC kicks the can down the road while the market mercilessly nibbles away at its market share! They postponed the unwinding of production cuts by 3 months to April 2025, while the original production quotas have been extended until the end of 2026. Figments of feverish imagination surely. And markets were listening closely to any chatter escaping the meeting room. The market dumped $1 as soon as the meeting began! Markets reversed a little on news that the original 2 mil b/d quotas would be extended until the end of 2026, and flat price Brent recovered into the $72 range to settle near the $72.51/bbl close of the Asian session. But things are soft, the market can be steered a little bit, but at the end of the day reacts to demand and…supply! The OPEC 8 announced another meeting on 10 December, to make sure we keep thinking about them, not that it will reveal anything meaningful. The cheating is getting worse but OPEC’s secondary sources… hello. complicit media, why do you want to report low production numbers? Come on, we all can count barrels, can’t we?

This afternoon, things looked primed for round two of pre-Christmas cheer after this morning’s jumpiness. But after lunch, markets took a turn. Flat price fell from around $74, gradually declining deeper into the $73 range and finally closed at $73.34/bbl. There was a minor interruption after the EIA’s weekly data showed a 5 mil bbl draw on national crude stocks. But this did little to arrest the momentum of the afternoon’s price action. It even kept going after the window, troubling $73/bbl. A sudden dump just before 18:00 dropped prices from $73.20 to $72.46/bbl by 18:20 GMT.

The Officials is starting a new Currency Index, ODX™, designed to reflect the financial conditions for major energy
importers in Asia. Four countries are the import leaders in the region: China, India, Japan and South Korea. ODX ™ is composed of the Chinese Yuan, the Indian Rupee, the Japanese Yen and the South Korean Won on the following percentages: Yuan 50%, India 25%, Yen 12.5% and Won 12.5%. The ODX™ is an index with an inception 100 basis set on 2 January 2024. Any subsequent rise, from that date, of the value of the US dollar relative to those major Asian oil importing currencies would lead to a rise in the ODX™. This is precisely what has happened this year.