Dated Brent close to 13-month high, demand steady
Platts' Jan MOC trading window most active in over 3 years
Action-packed few weeks led by Trafigura, BP, Shell and Unipec
London — Spot trading of physical crude that underpins Dated Brent has started 2021 recording the highest activity seen in the last five years for the key North Sea benchmark, according to data compiled by S&P Global Platts.
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Register NowAs the recovery of the oil market gathers pace, boosted by a gradual pickup in demand, oil companies and trading houses have adopted a more hands-on strategy but questions remain whether this pattern can be sustained.
The buzz has been seen in the S&P Global Platts Market on Close process, which is the main trading window for physical cargoes, especially for North Sea crude and European jet markets.
Dated Brent, which is used to price more than half of the world's crude, spiked to $62.04/b on Feb 12, the highest since Jan 22 last year, Platts data showed.
The rebound in demand helped by buying hubs China and India and a tightening of supply -- due to OPEC+ oil market management and US production flatlining 2 million b/d shy of its peak at around 11 million b/d -- is starting to provide fertile ground for increased spot liquidity.
Eventful start
January saw a total of 28 trades of North Sea physical crude cargoes (a total of 16.80 million barrels), in the Platts MOC, making it the most active trading window in this market since November 2017, which saw 33 trades.
There was an average of 12 trades totaling 7.2 million barrels each month in the North Sea MOC last year.
This trading vigor has continued into February, with already 10 North Sea cargo trades seen in the Platts MOC.
This makes it a total of 22.80 million barrels traded in the Platts MOC so far this year, more 46% higher than the 15.6 million barrels in the year-ago period.
The trading arm of France's Total – TOTSA has been one of the most active participants, selling 10 cargoes and buying one.
Trafigura, Shell, BP have also been very busy in the MOC,, with Trafigura's co-head of oil trading Ben Luckock last week calling the bull run, joining a number of analysts who have talked up the prospect of an oil supercycle.
China's Unipec has been the most active on the buying side, purchasing eight cargoes but all of that was in January and its demand has fallen sharply since then.
The five crudes that make up the Dated Brent complex -- Brent, Forties, Oseberg, Ekofisk and Troll (BFOET)-- normally find homes globally, mainly in Europe and Asia. Key buyers of these grades include the Netherlands, China, Germany, Sweden, South Korea, France United Kingdom, Italy, Spain and the United States.
China has particularly emerged as a major customer of North Sea crude over the past five years.
But Chinese demand for North Sea crudes has slowed dramatically for February and March loading barrels due to the refinery turnaround season but traders expect it to return shortly.
"The problem with China is you never know when they'll come back. The only sure thing is they will come back... but when?," said a North Sea crude trader. "End-March loading barrels land [in China] in early May so after the turnaround season."
Ample stockpiles and higher crude outright prices have also weighed on demand of these crudes, as China's interest for Middle Eastern crudes remained robust.
Indeed, some sources think the recent spike in activity masks the true picture.
"There is a lack of buying BFOET crude, particularly by China," one trading source said pointing to weaker mobility numbers in the global oil demand hub. "There is likely to be more reselling soon," the source added.
Paper vs. physical
But there is still a small lag between paper and physical Brent prices. ICE Brent crude futures prices have risen at a faster pace recently drawing strength from rising equities markets, OPEC+ compliance, easing virus numbers, and a weaker dollar.
The signs on the physical market, however, remain mixed. The balance-month Dated to Frontline swap, which provides a link to physical benchmarks, has narrowed recently. But some key crude grades have seen differentials against Dated Brent fall, suggesting a mixed outlook in the physical complex.
Some traders have said the situation is a case of macro fundamentals vs. micro fundamentals with an ample supply of crude available to meet the lockdown-hit requirements of refiners despite any longer-term optimism.
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North Sea crude sees lively start to 2021 as spot trading intensifies - S&P Global
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