2023 leaves oil markets stuck in a corner.

2023 will go down as a year that didn’t quite work out for those who relied heavily on expert forecasts and algorithms predicting the coming of $100 a barrel ICE Brent.?

The mythical figure was always seemingly “just around the corner” but those who followed the sirens calls still remain around the corner disillusioned and further away from reality than ever.

OPEC and OPEC+ did their level best to drive prices higher with seemingly never ending finger wagging at those who sold the markets short and frequent announcements of crude oil production cuts apparently made only for the purpose of “stabilizing” oil markets.

As the year drew to a close OPEC left a 2.2 million barrels a day production cut on the carpet ready to be triggered?in the first quarter of 2024…..but the oil market?just shrugged its shoulders and looked for something less predictable to mop up the surplus oil supply.?

There were no further press conferences from the OPEC alliance who mooched off into a corner of their own likely having decided enough had been said for 2023, with that old chestnut “nobody is bigger than the market” ringing loudly in their ears.

One factor in 2023 which played a large part in price volatility was the constant need for hot news to drive the futures numbers and economic sentiment.?

This took many forms, as we’ve said OPEC led the way all year although China got the ball rolling in January and February as a reported uptick in crude oil demand following the end of Covid lockdowns boosted manufacturing and pushed crude oil prices higher.

February 5th saw the banning of Russian fuel imports into Europe and the 1 year anniversary of Russia’s invasion of Ukraine.

In 2022 Vladimir Putin announced, a “special operation” expected to last just 3 weeks.

This “special operation” will have lasted two years in February 2024 but sits as just a disruptive backdrop to the oil markets rather than its constant driver, its contribution to market volatility having been minimal during 2023 except to mirror in oil prices the financial strain on US and Western economies.

As we went through the doldrums of Summer and into late Autumn the constant bickering and bantering between the American Federal Reserve Bank and the rest of the Global banking World over the thorny issue of interest rates dominated volatility, but suddenly out of nowhere on October the 7th the nightmare scenario of a major flare up in the Middle East and the possibility of an extended war entered the arena. Oil prices quickly moved higher but only from the angle of anticipating a worst case scenario based upon what might happen rather than how the region was being impacted on a day to day basis.

As we arrived in December the Red Sea became a difficult geographical region to navigate as commercial shipping navigated the Horn of Africa against a backdrop of Yemeni rebels threatening to damage commercial shipping with rockets and drones , but even that red hot news faded into the background over the final days of 2023 and prices eased with it,but on the very last day of the year the?U.S. military said on Sunday the 31st of December 2023 it shot down two anti-ship ballistic missiles fired toward a container ship by Yemen’s Houthi?rebels in the Red Sea.?

Hours later, four boats tried to attack the same ship, but U.S. forces opened fire, killing several of the armed crews, the U.S. Central Command said. No one was injured on the ship. The attacking boats were reported as sunk under fire from the U.S. warships.?The crew of the “Maersk Hangzhou” was safe and there was no indication of fire onboard the vessel, which was fully maneuverable and continued its journey north to Port Suez, Maersk said.

Sadly there can be no doubt the passing of a year will not change anything, those intent on disrupting our way of life will continue to do so regardless of the outcome.

Overall the oil markets have learnt much from the last year, the Covid “bounce” is over, physical oil markets provided the opportunity to make money and were the big winner, futures markets whether they be speculation, hedges or options were the big loser and will continue to confuse pushed around but encouraged by banks and forecasters who depend upon algorithmic guidance to lead them to unexplainable predictions and eventual losses.

Our own derivative and futures market experiences suggest it’s better to think for yourself and use your knowledge and experience to isolate the price drivers and manage the risk accordingly, work with those drivers and use them as part of your daily trading ….. use the difficulty the oil market presents and only run short term positions as for sure something is waiting around the corner to knock you off course!

In other news

In America March will see another SPR crude oil delivery. This follows January and February purchases, the US Department of Energy awarded SPR replenishment contracts for almost 3 million barrels of sour crude in March, awarding them to the same lineup of participants, Sunoco, Phillips 66 and Macquarie as in January and February.?

China Eases Limits on Fuel Oil Refining. The Chinese government has set its 2024 fuel oil import quota at a total of 20 million tonnes, up 4% from last year’s 19.2 million tonne tally, acquiescing to teapot refiners’ calls to relax controls on fuel oil that is frequently used as refining feedstock in Shandong. ?

Spain Cracks Down on Its Largest Oil Firm. Spanish oil major Repsol is under investigation by the European country’s antitrust watchdog for allegedly abusing its dominant position in the wholesale fuel market, mere weeks after the company’s fierce criticism of a proposed 1.2% tax on energy companies’ turnover.

Finland’s Refining Faces Industrial Action Risk. Workers at Finland’s Porvoo refinery operated by Neste Oil announced a two-day strike?on February 1-2, 2024?unless the government scraps its proposed labour market reforms that limit political strikes and make it easier to terminate contracts.

Qatar Expands into Oil Trading. QatarEnergy has signed?a 5-year term supply deal with UK-based energy major Shell to sell it some 50,000 b/d of Qatar Land and Marine crudes into the latter’s Singaporean refining system, the first ever five-year contract for the Qatari national energy company. ?

This week’s closing guide prices:

ICE Brent 77.04 (-4.08)

WTI 71.65 (-3.78)

ICE gas oil 750.75 (-35.75)

Euro Mogas swaps 724.00 (-12.00)

Euro naphtha swaps 628.00 (-19.00)

Nymex gasoline 2.1063 (-5.64)

Lpg swaps 513.00 (-4.00)

Opec basket 80.84

Credit - Robert Haynes - Silvergreen Energy