The North Sea crude market is flashing signs of weakness as heavy buying from Vitol Group and TotalEnergies SE subsides, removing a key pillar of support just as more supply is set to return to the Atlantic Basin.
Prices for key North Sea grades have tumbled in recent trading sessions. WTI Midland — one of the six crudes that underpin Dated Brent — traded at a two-month low of $1.70 a barrel above the global benchmark on Monday, according to traders monitoring the Platts pricing window run by S&P Global Commodity Insights.
The downturn is also showing up in derivatives contracts linked to the region’s crude. For the first time since November, weekly Brent contracts for difference, or CFDs, flipped into contango, a structure in which near-term prices are lower than later-dated contracts and which typically signals ample supply. Another key gauge, the so-called Brent DFL, also turned negative, underscoring physical market softness.
The weakness may deepen in the weeks ahead, with additional Kazakh barrels returning to the Mediterranean and Northwest Europe following earlier disruption, and high freight rates discouraging purchases by buyers in Asia.
Vitol, the world’s largest independent oil trader, and France’s TotalEnergies had been heavy buyers of prompt cargoes in recent weeks. Earlier this month, the two firms purchased a combined 17.5 million barrels in the Platts window and retained a further 7.7 million barrels through the so-called forward-chaining mechanism.
That unexplained buying spree has now faded. TotalEnergies switched to selling in the window on Monday for the first time in weeks.
TotalEnergies and Vitol both declined to comment on trading operations.
The pullback, coupled with the refinery maintenance season in Europe, points to softer demand going forward. And that comes as supply in the Atlantic Basin looks likely to increase. Flows through the Caspian Pipeline Consortium route are set to normalize soon following disruptions. At the same time, elevated freight rates are discouraging interest from Asian buyers, narrowing arbitrage opportunities and keeping more light sweet crude within the Atlantic Basin.
Wildcards remain though. Ongoing tensions between the US and Iran have heightened concerns about potential disruption to Middle East flows. Meanwhile, traders are wary of building large positions ahead of the Feb. 27 expiry of the front-month Brent contract, with expiry sessions often setting the tone of the physical market for the following month.
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