Dated Brent rallies but price reversal on the cards

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Gary Clark:

Welcome to the Platts Oil Markets podcast. I'm Gary Clark and I manage the EMEA Clean Refined Products price reporting team based out of London. Dated Brent has seen a rally in the first two weeks of 2026, driven by a supply crunch of light sweet crude oil in the Atlantic Basin. However, warnings have emerged for a potential reversal in prices as the market rolls further into the February trading cycle, impacting the pricing benchmark for oil around the world.

In mid-January, the global oil benchmark, Dated Brent, rose to its highest level since last September. The physical differential for Dated Brent cargo's trading in the North Sea saw its largest weekly gain in one and a half years. That pushed the differential to its highest level since 2022 at around $2 and 27 and a half cents as of January the 19th. The rally was attributed to persistently disrupted outflows of Kazakhstan's flagship CPC blend crude. A combination of drone strikes, maintenance works, and bad weather affected loadings at the Russian Black Sea port of Novorossiysk where CPC blend loads.

This has meant that as much as half a million barrels of the typical 1.6 million barrel per day flow of CPC blend out of the region was taken off the market leading to supply tightness across the region. Now, the bullish sentiment in the first half of January seems to have softened with market participants cautious of a rapid reversal in prices in the coming month. To dive deeper, we have our EMEA crude oil reporter, Ernest Puey, and also our oil team news reporter, Tom Washington with us today. So I mean, just looking at the flat price of crude oil over the last year, two years, the flat price has come down, albeit with volatility along the way and period when prices have risen in the short term. And really, arguably that's as a non-OPEC supply growth, particularly from Latin America has increased at the same time as OPEC has also unwound production cuts. But we're seeing this pocket of tightness and this rally in Brent crude prices. So, Tom, could you give us some context around these loading disruptions? How do we get to this situation today with respect to CPC?

Tom Washington:

Right, so first of all, there was maintenance on one of the three mooring points at the CPC terminal at Novorossiysk. That that has been extended by bad weather. It's unclear when that will end. I mean, it's winter. Bad weather has a habit of sticking around in winter. Also, what I would say is Novorossiysk historically has been very exposed to storms. Around this also, there was a Ukrainian drone strike on one of the remaining two mooring points, and that leaves us with one. That wasn't the only drone attack there has been. There has also been other drone strikes.

There were a couple of Greek tankers carrying CPC Blend in recent days that were hit. And so, this all rather clouds the outlook. Where we go from here is not really very clear, but what I would say, there's another element added to this in the form of a power outage at the Tignes oil field, and that has altered production. So we got a cocktail of factors really that are inhibiting the delivery of CPC blend to shipping. Now, previously, Kazakh officials had said that they can meet their export programs with two mooring points, and we are currently at one.

Gary Clark:

I see. Okay. So a mixture of factors on the supply side there. So how have these disruptions to loadings of CPC blend had? What effect have they had on the European crude oil market, Ernest?

Ernest Puey:

Yeah. Gary, so this shortfall has largely been filled by WTI Midland cargos entering Europe from the US, and that has been filling the shortfall of CPC blend that usually goes into both the Met, as well as the North Sea. Now, initially we saw a diversion of cargos moving into the Met to cover the shortfall, but as these disruptions dragged on, combinations of all the factors that Tom has gone through, we see that the knock-on effect has also affected the Northwest European market as well. Now, if we look at volume tracking data from S&P Global Commodities at Sea, we started to see this reduction in CPC Blend outflows from [inaudible 00:04:58] to Northwest Europe in October already. And the volumes of that flow are typically around 350,000 barrels per day. It's trying to lower in October 250,000 barrels, and in December just under 200,000 barrels a day.

So that's about a 40% reduction of typical flows from the port into the Northwest European region. So we started to see this rush from buyers to pre-book alternative grades in the North Sea to cover their requirements of light sweet crude oils. And Midland and Forties all started to flow into these gaps that were created by the shortfall. And that leads us to where we are today where refineries are still hurt seeking barrels in the region. The market is seeing this in two sets of issues. Firstly, the persistent disruption of the CPC blend outflows, but secondly, also that limited availability of cargo still around for sale within the current spot market.

Gary Clark:

Okay, and you said the word persistent there, right? With respect to these supply disruptions of the CBC blend, and this is in the broader context of where we've seen flat prices for crude oils trending down over the medium term of supply growth has risen. So are we at a turning point now in terms of the flat price rate? Are we seeing a reversal in trend or is this just a... You say it's persistent at this moment in time, but could these supply issues be resolved?

Ernest Puey:

Yeah, so I think there would be potentially sort of two angles to this, right? With the overall decline in crude oil prices of the ICE brands futures, for example. Those are primarily driven by very macro factors so think of production out of Latin America, the slowing demand growth for oil overall globally. These are kind of the factors that have been dragging on ICE brands. Yet, if we look at the data brand differential, which sort of looks at the physical markets as it stands right now, and the difference between the price of a physical cargo over the implied forward curve.

Now, that's reflecting that within the cargo market, there's a huge tightness right now within the North Sea and the reversal potentially could happen in the return of CPC blend, thereby bringing more volumes back into Europe as a whole and alleviating the current crunch that we are seeing right now. That said, the overall ICE brand futures momentum seems to be on a downward trend. If we look at the technical analysis of the curve over the last two or three years, there's a pretty strong downtrend flowing from there. And these are sort of two slightly different factors. One looking into the curves and the derivatives that are affected by the macro picture, but also in the same vein, the cargos and the physical market that are trading at a pretty strong premium right now reflecting that tightness of just actual cargos floating around.

Gary Clark:

Okay. Okay. It's obviously very interesting and complex on the supply side of things. Turning over to demand, right? In recent days, we've had the US administration talking about tariffs on European countries with respect to their stance over Greenland. I think we're saying sort beginning of February that possibly these could come into effect and that's clearly a damp enough oil demand. How does demand fit into this, into the picture at the moment?

Ernest Puey:

So, Gary, if we look at demand right now as mentioned, refineries are still seeking oil. We are seeing bids in the Platts Market on closed assessment process over the past week. That's kind of reflecting that buying interest in the market that we've been seeing since the start of January really for the North Sea rates. And this has gone beyond just the data brand basket, right? So if the data brand basket was representative of light sweet crude in the Atlantic Basin, even the sour complex has come into play here as refiners are fulfilling the commitments of output and still seeking oil out there.

And even if the light sweet crude are not available, they've been pulling in more sour grades that may not particularly be the typical grades that we see moving into the market right now. And margins wise, in terms of refining margins, those have come off a little bit in the last of months, but by and large, the market is not seeing that as a huge loss in margins. It's still generally decent as the market might say. So demand is still there right now. Is it above typical levels? I don't think that's particularly clear, but they are emerging and rearing the head precisely because of the supply crunch and the lack of availability of cargoes. That's really showing the buy side being pretty strong right now.

Tom Washington:

What I would add is that on the shipping side, we've seen impact as well. Since the recent tanker attacks, [inaudible 00:09:25] rates to load CPC blend from the Black Sea taking towards Mediterranean have surged, they jumped to 37%, so slightly over $30 per metric ton, that's the highest since November, 2022. Since then, the last few years they've remained at about that level. And I think one thing that's came from all this would be we don't know what the future holds. They could well remain there as long as the threat remains. We don't know how long that threat remains.

Ernest Puey:

And if I may add to Tom as well, I think we started the podcast talking about the potential reversal. And as we roll closer into February, we've discussed about the uncertainty on the outlook of supply flowing from the CPC blend output overall from the Black Sea. Now, here's the main concern because if everyone in the market right now is, I quote one of the sources we've been speaking to is "trying to live without CPC so to speak," unquote, that we might have a situation that as CPC blend and this competitively priced Kazakh crude comes back into the market and overall buyers have already secured and pre-booked alternative grades, then we're going to enter into a phase of oversupply and that's going to in turn then drag on the data brand differential, that physical differential that we are seen that's powered through in the first two weeks of the year.

So that is the real fear. The questions do remain over the speed of how the CPC blend flows are coming back. Is it going to be quick? Is it going to be soon? I think those are the key factors that are going to be playing in the minds of the market participants right now. And I don't think we have great clarity on that as well on our end, Tom, in terms of how things are going to work out for repairs and the light?

Tom Washington:

No, as I say, in terms of repairs, we've got poor weather arguably ahead of us for some time yet that affects maintenance. In terms of tax, who knows? I mean, say in terms of the tax, it's not clear why CPC is being targeted or has been targeted with different entities that we don't know for sure, but say this is Kazakh crude, overwhelmingly Kazakh crude, but it's not Russian crude. So I would say there's plenty of uncertainty around.

Gary Clark:

Okay. Well thank you, Ernest. Thank you, Tom. It's a very interesting discussion on why Dated Brent differentials have soared to this three year high amid these various factors driving this supply grunt for CPC blend crude. And it'll be very interesting to see how this situation unfolds going forward, if this is a turning point for Brent crude prices or if they remain on their soft trajectory as it were, that we know we've seen over the past year or so. And before we go, I'm delighted to say that the registration for the London Energy Forum 2026 is now open, two weeks earlier than previous years. The Global Energy Community will convene in London to kick off International Energy Week. So do join us on Monday, February the 9th at the Park Plaza Westminster Bridge as we explore our core theme, expanding energy markets and trade.

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