Key facts
- Dated Brent, a physical oil benchmark, surged above $120 per barrel.
- ICE Brent futures slipped toward $101 per barrel.
- EU governments are considering releasing 50 million barrels of diesel from emergency inventories.
- China has reinstated its refined product export ban for October.
- Russia extended its diesel export ban through October.
- OPEC+ is expected to keep November output targets unchanged.
Physical oil markets are experiencing a significant tightening, evidenced by Dated Brent, a key physical benchmark, surging above $120 per barrel. This contrasts with the lower price of ICE Brent futures, suggesting a disconnect that points to underlying supply constraints. Several factors are contributing to this volatility and tightness. Europe is contemplating the release of 50 million barrels of diesel from its emergency inventories, a move that could impact global supply. China has reinstated a ban on most refined product exports for October, exacerbating shortages in Asia. Russia has also extended its diesel export ban, removing a notable portion of seaborne supply as winter demand increases. These supply-side pressures are occurring even as OPEC+ is expected to maintain its current output targets at an upcoming meeting, with August production rising by 630,000 b/d to 25 million b/d but still below pre-war levels. In other energy-related news, Canada's energy regulator approved new tolls for the Trans Mountain pipeline, and Panama's government is considering restarting the Cobre Panama copper mine. Meanwhile, Chinese lithium carbonate futures have fallen sharply due to demand concerns, and Chinese thermal coal prices have reached a three-year high.