- The North Sea crude market experienced a record-breaking trading day, with eight cargoes traded, potentially influencing Brent Crude prices.
- Major oil companies and trading firms participated in the trading frenzy, signaling bullish market sentiment.
- While the trading activity could impact Brent Crude prices, OPEC+ production decisions and global economic factors will likely have a more significant influence.
The North Sea crude market, which is typically in a lull in December, saw on Monday the biggest trading activity on record in a single day as trading giants and oil majors snapped up a total of eight cargoes.
Seven of these eight cargoes carry crude grades that help underpin the Dated Brent benchmark, the world’s most important and closely watched benchmark for crude, which is used to price more than three-quarters of the traded oil in the world.
The unusually high trading activity early this week could push up Brent Crude prices, as similarly frenzied trades did in the middle of this year.
But the OPEC+ group’s decision on production cuts for next year and the state of the Chinese economy and oil demand in the near term are likely to have more weight on market sentiment.
On Monday, eight cargoes for delivery in the second half of December were traded in the North Sea pricing window run by Platts. That’s the most on record in data compiled by Bloomberg since 2008.
Four cargoes of WTI Midland traded during the window, as well as one each of Brent, Forties, Oseberg, and Johan Sverdrup.
Norway’s energy major Equinor sold five of these cargoes, while trading giant Gunvor sold the other three. Buyers were French supermajor TotalEnergies and trading major Trafigura, plus one cargo snapped up by BP.
Of all the grades traded on Monday, only the Johan Sverdrup crude is not used to underpin the Dated Brent benchmark.
The Brent Crude benchmark is underpinned by the value of North Sea crudes Brent, Troll, Ekofisk, Forties, and Oseberg, as well as the U.S. West Texas Intermediate Midland crude, which was added to the international benchmark in June 2023.
The large trades in the North Sea crude market could have an impact on the benchmark, as it was seen earlier this year.
At the end of June, weeks of bullish trades of North Sea crude grades that underpin the international benchmark Brent resulted in a rally of Brent Crude prices.
Trading giants Gunvor and Trafigura bought and bid for dozens of North Sea crude cargoes in June, driving up the Brent Crude benchmark to above $86 per barrel.
Back then, the buying of the North Sea crudes by major commodity trading houses sparked an immediate rise in benchmark Brent prices as market sentiment changed to bullish after trading giants bid heavily for these crude grades.
This week, after the record eight cargoes traded on Monday, and another three WTI Midland cargoes traded in the Tuesday window, the price of WTI Midland rose compared to Monday, according to calculations by Reuters.
The record trading activity on Monday could have some impact on Brent prices, but these will be much more affected in the short term by whatever OPEC+ decides to do with the ongoing production cuts at the meeting on December 5.
The latest market speculation is that OPEC+ is discussing a three-month extension of its production cuts until the end of the first quarter of 2025, Reuters reported on Tuesday, citing unnamed sources from the group.
There are also many unknowns for early 2025, including China’s oil demand, the conflicts in Ukraine and the Middle East, and the incoming Trump Administration in the White House. All these could sway oil prices one way or the other.
Brent Crude prices are expected to average $74.53 a barrel next year, a monthly Reuters poll of dozens of analysts showed last week, as the experts downgraded their price outlook for the seventh consecutive month.
Brent prices are set to average $74.53 per barrel in 2025, down from the previous month’s estimate of $76.61 a barrel, as weaker global demand growth and enough supply would offset the impact of a potential delay to the OPEC+ cuts, said 41 analysts and economists in the survey.
By Tsvetana Paraskova for Oilprice.com
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