Geopolitical Risk Premium Encore S5 | E42

The resolution of the OPEC drama has brought contentment to market players as they embrace a stable oil price in the low 70s. Despite this relief, demand concerns persist as Brent spreads remain in contango until April/May"24, indicating a prevailing weak physical sentiment in the market. Complicating matters, a geopolitical risk premium hangs over the Red Sea, prompting commercial shipping companies to avoid the area. Instead, vessels are rerouted through the safer but longer passage around the Cape of Good Hope due to heightened tensions involving the Houthis. These actions, including attempts to obstruct cargo shipments to Israel and claiming responsibility for past attacks, have placed major shipping companies like Maersk and Hapag-Lloyd on high alert. Refinery margins have seen increased support, with the influence of crude oil being amplified in the products. Notably, there has been a positive shift in gasoil and European gasoline (EBOB). Despite EBOB experiencing robust bidding throughout the week, there has been a noteworthy shift in the trade house"s stance from bidding to selling in significant volume in the prompt market. Martha gives her trade Idea of the week; going long in the Feb WTI/Brent futures spread, but you can learn more about that here: https://youtu.be/NKUR7n_rYmY