The more things change…. The more they stay the same..

A difficult week in which oil prices wobbled until Thursday but found a floor by Friday as ICE Brent stubbornly held its $73 a barrel price tag. European gasoline swaps having looked doomed to go much lower all week found a life jacket as the trade began to buy the transatlantic paper arb again, the European gasoline market remains in a parlous state especially for West African grades as European blenders and local Nigerian marketers try to adapt to the challenges created by NNPC tightening sulphur and oxygenate specifications alongside the steady emergence of the Dangote refinery as a major participant in the Nigerian oil market.

However, in 2024, the same price drivers we’ve had all year surprisingly remain in place,(except for Syria) some influential, some not, a brief analysis of those drivers is worth a glance here….

The Russia / Ukraine war rages on….

The Middle East continues unsettled, the threat to oil flows has slowed, but the now and then, tit for tat exchange of missiles and rockets between various factions and Israel goes on….The most recent of these attacks was by Houthi rebels this weekend as they fired hypersonic, ballistic rockets from Yemen into a Tel Aviv Park injuring several people. Prior to the news of the Houthi attack, a working group from Israel had been in the Qatari capital of Doha this week re-establishing relations with mediators in the event of a breakthrough in negotiations with Hamas.

Israeli Defence Minister Israel Katz, speaking on Monday, said a truce is "closer than ever," while Foreign Minister Gideon Saar told hostage families, he's more upbeat than a month ago, but it must be said none of this is new and the World holds its breath hoping there will be workable solutions and the violence will end.

Iran’s presence in the conflict remains via their tentacles of war, the long-awaited revenge attack against Israel has not come to pass and that has kept oil prices stable. Iranian infrastructure and capability to launch attacks has been weakened and even if that wasn’t the case, it can only be a matter of time before “The Donald “ratchets up sanctions against Iran again. Iran continues to produce 3.4 million barrels of oil a day, and it’s vital for the Iranian economy these exports continue to flow. We should note that much of these oil exports are for Chinese destinations, but lately China has become hesitant to discharge U.S. and European sanctioned ships, and oil originating from sanctioned countries.

Kpler reports Iran has almost 17 million barrels anchored off Malaysia looking for homes into Chinese ports, but much of that oil is wrapped in sanctions with no place to go. Those 17 million barrels of Iranian oil include the vlcc Bendigo, a Barbados-flagged crude carrier that has been sitting in the waters off Malaysia, fully laden, since Oct. 20, according to ship-tracking data compiled by Bloomberg. The 19-year-old vessel received oil from Hilda I, an Iranian VLCC that hauled crude from the Kharg Island export terminal. The MS Enola, a 22-year-old VLCC that sails under Djibouti's flag, has been in the same area since Nov. 11, loaded with Iranian crude. It had taken those barrels from Dino I, another supertanker that's owned by Iran's national oil company. The MS Enola was sanctioned by the US on Thursday. Iran has ramped up output over the past two years to 3.4 million barrels a day, figures compiled by Bloomberg show, just short of the levels pumped before then-president Trump reimposed sanctions in 2018.(all reported by Vortexa, Kpler and Bloomberg)

Meanwhile, China has been the most influential oil price driver during the last two years but even their activities have become circular and confusing. Their recent requirement for a bullish 6 million metric tonnes of crude oil to be delivered by the end of 2024 always logistically looked a tough ask but spending a little time assessing the aftermath of the “tender” tells us it’s not all that it seems.

Firstly, not all qualified refiners have applied for the additional allocations. Many have been operating at low rates this year due to weak domestic demand, and the usual end-of-year quota shortage has fortuitously not materialised this time. Now, refiners who have been granted additional quotas may face challenges in importing the required volumes by 31st December.

Vortex writes, China's stockpiling under the latest SPR mandate accelerated in November, with more Russian ESPO Blend crude and non-Iranian Middle Eastern grades added to majors-owned commercial storage tanks and heightened OFAC tanker sanctions on Iran put China's December arrivals at risk. Recent US tanker sanctions have led to a slowdown in Iranian vessels calling at Shandong ports, as Chinese buyers increasingly require cargos to be delivered on non-sanctioned vessels.

To add to the confusion, China's biggest refiner, Sinopec, said on Thursday the nation's gasoline demand peaked last year, adding to an already-weak outlook in the world's top crude importer.

OPEC+ continued to run the market ragged in 2024, changing plans at least 3 times during the year as they continued to slow oil supply as leverage to keep oil prices stable to higher. Inevitably we will not really know whether their latest version of the master plan is working until second quarter of 2025 at the earliest but keeping that uncertainty in play is all part of the game that prevents many from pushing oil prices lower to a more realistic price level than today.

The latest political change came in Syria as President Assad was overthrown just two weeks ago.

The impact on oil prices was minimal. The US lifted a $10 million bounty on Syria's de facto leader Ahmed Al-Sharaa ( who claims not to be a threat to the World) after an American delegation met him in Damascus on Friday, a move it said was needed for Washington to engage with the country's interim government. The delegation, which included the State Department's top Middle East diplomat, Barbara Leaf, and lead hostage negotiator Roger Carstens, made the first US diplomatic visit to the Syrian capital since 2012, they said in a briefing Friday after departing the country.

Whilst markets have recently improved fundamentally and trade has become steady rather than dismal, trying to force prices in a certain direction has never been easy, as we often say nobody is bigger than the market, but in the oil market today there are many factors in play, many of which are speculation rather reality. The oil markets are so confusing that it’s fair to say nobody can seriously forecast what comes next for any length of time.

In many ways oil finds itself archived in terms of an investment vehicle, let’s hope this changes in 2025.

This week’s closing guide prices:

ICE Brent 72.98 (-0.79)

WTI 69.46 (-0.98)

Ice gas oil 677.25 (-5.75)

Euro Mogas swaps 675.25 (-4.25)

Euro naphtha swaps 618.50 (+6.00)

Nymex gasoline 1.9416 (-2.82 cents per gallon)

Lpg swaps 550.50 (-6.00)

Opec basket 72.68