The Officials

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.

The avalanche accelerates! Reports that yet more OPEC+ members want to expedite the return of barrels from the June release precipitated a $1.50 flat price dump back towards the mid-$65 range. Stunned and perhaps slightly dizzy, Brent managed to re-find its feet and consolidated to close the European session at $65.64/bbl. If they’re worried about their revenues and selling at low prices, it’s odd they should reveal this now that prices were well down in the 60s. Kazakhstan opened Pandora’s Box!

“I have no intention of firing him.” We expect you can guess who’s speaking and about whom… Yes, Trump has no plans to fire the market’s darling, Powell. Not that he ever could – legally! His comments in the Oval Office last night were uncharacteristically restrained. We suppose the market’s plummet may well have whipped him into a more sober state of mind.

The US are feeling the strain as even Bessent reportedly said the tariff situation with China is “unsustainable” and he expects a tempering of hostilities. They haven’t caved in yet, but the cracks are beginning to show! He admitted the tariffs have suffocated trade potential so much that they operate effectively as an embargo and the markets liked it – rising from nearly $66.80 to $68 within half an hour! Equities liked it to and the S&P 500 surged 2.7%. But they quickly ran out of steam and fell back!

By contrast to the strong growth seen in recent weeks, in the week ending April 17th, exchange traded futures volumes fell considerably ahead of the long weekend as shown in our momentum table. After the frenetic period following Trump’s tariffs announcement, last week saw a significant risk-off move. This saw a drop of around 50% or more in most contract volumes. Gasoil contracts saw the smallest decline across all tenors.

PetroChina had its hands full today! Of course, Vitol was back, bidding hard and lifting many PC and Reliance offers. And Gunvor returned with a vengeance, lifting offers and bidding enthusiastically too – and Exxon showed more energy than we had seen for a while on the buyside, bidding alongside the dynamic duo. This congregation is a rare sight, we must say. Alongside PC on the sellside, Reliance threw in some offers but didn’t want to plunge as deep as their Chinese counterparts. BP hit the odd bid but kept its distance for the most part. Despite the buyers’ onslaught, the Dubai physical premium slipped 12c to $1.87 – kudos PC! After this clash of the titans, PC declared another Murban cargo to Vitol – that brings the April total to 24, of which 16 have gone to Vitol. Even more impressively, PC has sold 23 of those 24! The only other was from Reliance. And Murban is clearly the favoured grade now; since 14 April, it’s the only one that’s been nominated. We also notice the absence of ADNOC, what happened there?

Oil markets were walloped following last week’s war fear inspired sudden rise. But it was clear both sides, US and Iran, want to
play nice and issue friendly statements. Nevermind that the real action is in Houthiland and surrounding waters. While bombs are
dropped on Yemen, expensive American drones are also blasted out of the sky. Should they come to an agreement, surely the
Gulf neighbors won’t want any disturbances, prices are set to get whacked.

While Trump and co go about their crusade sanctioneering and blocking free movement of goods and oil, their efforts seem misplaced. Sources told us the most recent target of sanctions, Shandong Shenxing Chemical Co, had already transferred its assets and is simply a shell company. He’s got the spirit to take on China, he just keeps missing the mark!

Headlines can only go so far and the Americans can only cry wolf so many times before the market doesn’t listen anymore. Yet more threats of culling Iranian crude exports to “zero” had Brent up to over $66.70 this morning.
Even if some people are taking their foot off the gas ahead of the long weekend, that certainly wasn’t the case in this morning’s extra early Dubai window. Of course, it was Vitol making the most noise and lifting PetroChina offers all over the shop. If PC had a stall at the market, Vitol would have picked up the whole thing and walked off with it while PC’s back was turned hitting Gunvor and Totsa bids. This saw Vitol earn another 2 convergences with PC – which declared 2 Murban cargoes. But even that wasn’t enough for Vitol, which also went after Hengli and BP offers – Reliance also got caught in Vitol’s rampage. Even so, the premium slipped 10c to $1.90 today.

The Jakarta futures exchange will use The Officials Brent Index (OBI) assessments to settle futures contracts. The listing is targeted to start in July 2025. Please see link: https://www.linkedin.com/feed/update/urn:li:activity:7318195273757855744/
We said in this morning’s Asia report that a 245% tariff on Chinese goods would essentially be an embargo, but now Trump reportedly wants to enforce an actual embargo. Reports suggest the US wants to negotiate over 70 nations into not accepting Chinese good shipments passing through their ports. Do not underestimate the significance of this: it would hit almost all commodity markets – copper would be whacked, petchem demand would get torpedoed and oil demand would be gravely stunted. Trump loves building walls – unfortunately this one is a brick wall in the road of economic development. The more likely result, however, is that Trump is laughed off for the ludicrous suggestion this is.

245% tariffs… I have a bigger stick than you. It sounds scary, but who really cares? China-US trade is already dead as a dodo and 245% would essentially be an embargo. Maybe Trump’s just increasing the number, until it reaches the White House phone number and Xi will finally get the hint and call him to make a deal.