Oil prices are on the rise, and it's all thanks to refined products! But here's where it gets controversial...
The Power of Refined Products:
Yesterday, oil prices experienced a significant boost, with Brent crude settling over 1.4% higher, pushing past the $65/bbl mark. This recent surge in the oil market is primarily driven by refined products, specifically gasoline and gasoil. The cracks in these refined products have widened, sparking concerns about supply.
One major concern for the market is the ongoing Ukrainian drone attacks on Russian refineries, which could disrupt the production of middle distillates. Additionally, US sanctions on Lukoil and Rosneft have raised questions about the future of refining assets outside Russia, further impacting the broader product markets.
While the overall outlook for oil remains bearish, the resilience of the refined products market is a game-changer. It's a significant obstacle to the bearish sentiment, and it's worth exploring why.
The Russian Crude Conundrum:
There's a lot of uncertainty surrounding Russian crude oil flows due to sanctions. Ship tracking data shows a slowdown in recent weeks, with the 4-week average at its lowest since mid-September. This decline in volumes to China and India is notable, but here's the twist: a significant portion of Russian seaborne shipments have unknown destinations, which could ultimately end up in these two countries.
Key Reports to Watch:
Today, we have a trio of reports to keep an eye on:
- OPEC's Monthly Oil Market Report, offering insights into the market outlook for the remainder of 2023 and beyond.
- The Energy Information Administration's Short-Term Energy Outlook, including forecasts for US oil and gas supplies.
- The American Petroleum Institute's weekly US crude and refined product inventory numbers, which were delayed due to a public holiday.
Agriculture: Cocoa's Sweet Surprise:
In the world of agriculture, London cocoa prices took a dip yesterday, falling by over 4.7%. This decline was triggered by strong arrivals at ports in the Ivory Coast. The week ending November 9th saw arrivals totaling 107,139 tonnes, a 20% increase from the same period last year.
The improved supply prospects, coupled with previously high prices, are expected to boost grindings. As a result, the global cocoa market is set for a surplus through the 2025/26 season, following a small surplus in 2024/25. This surplus helps alleviate the tightness concerns that have plagued the cocoa market for years.
And this is the part most people miss: the refined products market is a key player in this entire narrative. It's a reminder that sometimes, it's the refined details that make all the difference.
What do you think? Is the refined products market the unsung hero here? Or is there another factor at play? Let's discuss in the comments!
