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Market Close: Oct 25 Mixed

Fueling Strategy: Please fuel as needed tonight, Tuesday plan on a “partial fill only” day due to Wednesday we’ll see prices go back up ~ Be Safe
NYMEX Crude    $ 83.76 NC $.0000
NYMEX ULSD     $2.5647 UP $.0258
NYMEX Gas       $2.5162 UP $.0341
NEWS
The culprit behind the latest jump in oil prices isn’t soaring natural gas prices or even OPEC+’s limits on output but rather what is happening at America’s largest oil storage hub in Oklahoma. Traders are fretting that stockpiles in Cushing will fall as low as they physically can. It has sent gauges of market health known as time spreads soaring to their most bullish levels in years, a move that is now spilling over to the global Brent benchmark. Cushing is the delivery point for U.S. crude futures and one of the largest storage hubs in the world. Supply and demand balances there drive daily oil trading worth hundreds of millions of dollars. The higher the cost of oil for prompt delivery relative to later-dated contracts reflects just how short supply is relative to demand.

The numbers are eye watering. For U.S. crude, nearby contracts are at their biggest premium to those for five months later since 2018 — when Cushing stockpiles were near operational lows. The December-December spread, a favored trade of the world’s oil hedge funds, is at its strongest since 2013 a year when prices averaged almost $100 a barrel. As a result, the oil market is doing whatever it can to keep U.S. crude at home. West Texas Intermediate crude was its smallest discount to international benchmark Brent since April 2020, a move that’s set to curb flows abroad. That means similar quality North Sea barrels are expected to rally, and that is spurring buying of the global Brent benchmark’s structure. Its closely-watched Dec.-Red-Dec. spread is just 60 cents away from a record.

As a result, the oil market is doing whatever it can to keep U.S. crude at home. West Texas Intermediate crude was its smallest discount to international benchmark Brent since April 2020, a move that’s set to curb flows abroad. That means similar quality North Sea barrels are expected to rally, and that is spurring buying of the global Brent benchmark’s structure. Its closely-watched Dec.-Red-Dec. spread is just 60 cents away from a record.

Despite the surge, there are reasons to be cautious. Demand from Asia has helped support physical crude markets in recent weeks but there are some signs of a slowdown. Two supertankers laden with Forties have also been floating off Southwold, England, for more than one month after failing to secure buyers in Asia, according to ship tracking data compiled by Bloomberg. Higher premiums for light-sweet crudes make them less attractive to buyers in Asia and physical differentials are yet to show the same roaring strength as time spreads.

The rampant bullishness also shows up in speculative flows. Oil options flows indicate investors strongly favor bullish wagers- known as calls – over bearish bets. Trading of Brent $100 calls has jumped in weeks, and open interest over the next year has almost doubled to more than 80,000 contracts so far this month. There’s also been buying as high as $150 and $200.

For now though, the Brent market is following WTI higher as traders wager that light sweet supply will remain tight. The difference between January and February contracts is above a dollar for the first time since 2019, while the February-March spread also topped a dollar. The only other time that spreads further down the futures curve have settled at such strong levels, headline prices were trading closer to $100.

“Brent spreads are rallying as the idea of diminished exports from the U.S. with good margins and stronger global runs means that Brent related barrels may have to replace U.S. crudes,” said Scott Shelton energy specialist at ICAP.

Have a Great Day,
Loren R Bailey, President
Office: 479-846-2761
Cell: 479-790-5581
www.owneroperatoradvisoryservice.com
“To give real service you must add something which cannot be bought or measured with money, and that is sincerity and integrity.”
Categories: Fuel News
loren: Fuel Manager Services Inc. "Serving the trucking industry since 1992" I've been in and around the trucking industry for 45-years beginning in owner operator operations at Willis Shaw Express. I bought a small trucking company that I ran for 6-years then sold and went to work for J.B. Hunt Transport in 1982. After 10-years with Hunt, I started Fuel Manager Services, Inc., we are in our 29th year of serving the American trucking companies. Our simple goal was and is to bridge the gap between the trucking companies and the fuel suppliers.