Oil trading was lower on Monday as hopes that Israel and Hamas would reach a ceasefire in Cairo helped to ease tensions over a potential wider conflict in the Middle East.

Oil trading trends: Crude/WTI prices dip

Benchmark Brent crude futures for June dipped by 70 cents, (0.8%) to trade at $88.80 a barrel around midday GMT, while futures for July lost 52 cents to $87.69 a barrel.

US West Texas Intermediate (WTI) futures were also lower, shedding 58 cents to $83.27 a barrel.

Oil trading trends: US monetary policy review

Traders were also eyeing the next review of US monetary policy by the Federal Reserve on 1 May after March’s report of persistently high US inflation had doused hopes of immediate interest rate cuts.

Rising US interest rates make the dollar look more attractive and this might mean that holders of other currencies will need to pay more for oil, leading to lower demand.

Oil trading trends: US inflation fears

As the market analyst Tina Teng at the Capital Economics research firm put it of oil, ‘Sticky US inflation spurs fears for higher-for-longer rates,’ and that commodity prices will come under pressure.

Oil trading trends: Ukraine conflict continues

In Europe, preliminary April inflation figures from Spain and Germany offered mixed signals for the European Central Bank, which is widely expected to cut rates in June, although hard-landing market declines and a Russian invasion of Ukraine appear unlikely at this point.

More comprehensive inflation data across the eurozone will be released on Tuesday.

Oil trading trends: Shell in court

It was the financial details of Shell’s (SHEL.L) enormous oil and gas trading operations – one of the company’s most closely guarded secrets – that emerged during the litigation between the company and a former employee.

In that legal tussle, the public got a partial look at the profits that went into the company’s U.S. crude trading – half a billion dollars, but more recent years have fetched around $1 billion a year.

Oil trading trends: 1 billion in trading

In testimony before a Texas state court, John Dimech, a former director of Shell’s crude oil trading division in the United States, said that this arm typically makes somewhere between $950 million and $1 billion a year.

This money made up 13% to 15% of US pre-tax profits for Shell in recent years, according to the company’s financial filings.

Overall, Shell reported more than $7 billion of pre-tax profits in the US in 2022 and about $6.36 billion in 2021.

Shell still isn’t talking about the results of its trading, which is the largest oil and gas desk in the world, a business that can make – or lose – a lot of money.

That secrecy is raising eyebrows among some shareholders.

Oil trading trends: Insider trading

Oil trading relies on differences in supply and demand around the world as a way to lock in profits, and successful traders are rewarded in multiples of the 2.7 million pounds ($3.4 million) annual bonus, reported last year for Shell’s chief executive, Wael Sawan.

Beyond the disgusting allegations of eugenics, the court case hinged on a breach of contract claim by Eva-Maria Frohn, former trading manager at Shell and a woman on the go-slow.

Oil trading trends: Shell bonuses

In demand of $15 million, including a $6 million 2021 bonus for a year when she might be at the clinic or in court, Frohn previously bagged a $6 million bonus for 2020.

Frohn claimed that the job she was offered to transfer to was financially less rewarding than her existing job and that she should be paid off as if she had been made redundant.

Shell contended that Frohn had resigned by turning down the job offer.

Last Tuesday, the case came to a close with the jury ruling in favour of Shell, affirming the rejection of Frohn’s claims.

The plaintiff’s attorney did not return requests for comments.

Oil trading trends: Dubious purchases

The oil-trading trends and market dynamics that let to Shell purchasing ConocoPhilips refinery in Alaska for $986 million in 2000, and led to a hefty $13.2 billion profit from oil trading in 2005, aren’t exactly easy for the average Joe or Joanna to comprehend.

Even as bankers pulled back from their rush to war between Israel and Iran, oil traders were selling crude at a blistering pace, halting the advance toward $100 a barrel.

Oil trading trends: Hedge funds sell off

In the six most important petroleum futures and options contracts, hedge funds and other money managers sold off 95 million barrels in the week ending 23 April – the fastest pace in more than six months.

Oil trading trends: ICE Futures

The selling, the fastest since October 2023, combined with sales the previous week to bring the two-week total to 119 million barrels, according to reports from ICE Futures Europe and the US Commodity Futures Trading Commission.

The total position was trimmed to 566 million barrels, down from a higher 685 million on 9 April, and to the 49th percentage (out of all weeks since 2013), with the evaporation of the premier war risk on its futures.

The week just ended saw massive selling at all positions, crude and European gas oil feeling the most severe since wars in the Middle East tend to impact them most.

Oil trading trends: Short selling

Vast quantities were sold short: Brent crude down 39 million barrels, NYMEX and ICE WTI down 26 million barrels each, European gas oil down 24 million barrels, and US gasoline down 7 million barrels, with nothing new in US diesel.

Total crude positions were taken down to 453 million barrels from 522 million earlier in the month, when tensions between Iran and Israel flared.

The net of bullish longs minus bearish shorts was suddenly a much tamer 3.51:1, down from a much more bullish 4.97:1 in late March.

Oil trading trends: Saudia Arabia OPEC+ deals

Even though Saudi Arabia and its allies in OPEC+ kept oil production at unusually curbed levels, planning to restore output more gradually after the summer, fund managers decided that there was not imminent threat to oil facilities around the Persian Gulf or to tanker routes through the Straits of Hormuz.

Opinion among fund managers on prospects for US gasoline was even more divided, especially in an election year.

The net long position decreased slightly to 73 million barrels from 85 million barrels in the previous week, but the total number of short positions soared, suggesting a clear focus on downside risks.

Oil trading trends: US fuel stocks steady

US gasoline stocks were steady, and consumption remained robust, supported by the continued growth in employment and incomes.

The only mitigating geopolitical factors were the scaled-down drone attacks by Ukraine on Russian refineries, reducing the threat to gasoline supplies.

Natural gas funds got less gloomy, buying 382 billion cubic feet in big futures and options contracts – the fastest buying since early April.

Low gas prices made extra gas burn economical, too, boosting use by gas-fired generators which might help shrink surpluses during the high-demand summer.

Oil trading trends: Market place sentiment

In summary, the geopolitical stability, supply-demand status and the sentiment in the market place have been fluctuating in the short term, as shown in how the oil trading happened for the last five years.

My prediction for the future price of oil is that it will remain mostly stable.

Discussions between the United Arab Emirates and Ukraine have concluded on a bilateral trade agreement, to be finalised with an official signing in the near future, in line with a joint statement released on Monday.

Oil trading trends: CEPA agreement

The Comprehensive Economic Partnership Agreement (CEPA) removes or lowers tariffs on a wide range of goods and products, simplifies trade barriers and facilitates market access for exporters from both nations.

Furthermore, the CEPA is specifically designed to contribute to Ukraine’s recovery by rebuilding its strategic sectors and infrastructure production and to enhance supply chains to the Middle East and North Africa for major exports like grains, machinery and metals, following current oil trading patterns and the broader economic exchange.

Even as geopolitical conflicts over Ukraine simmered, the UAE refused to join the Western-led boycott of Moscow, a fellow member of OPEC+, and continued talks to sell more crude and gas.

Towards the end of 2022, the UAE launched trade talks with Ukraine. This signals a shift towards diversifying strategic partners.

Oil trading trends: UAE-Ukraine deal

By 2023, UAE-Ukraine non-oil bilateral trade increased to $385.8 million, and joint investments worth approximately $360 million were realised by the end of 2022 across logistics, infrastructure, travel, tourism and advanced technology sectors.

With its war with Russia severely crippling the Ukrainian economy, the UAE regarded a major opportunity for the long term.

‘The CEPA is a strategic agreement that consolidates a new gateway to Europe through Ukraine,’ Thani al Zeyoudi, the UAE Minister for Foreign Trade, told Reuters.

‘Through this golden opportunity, the UAE looks forward to further enhancing market access for goods and services, and strengthening our connectivity to the European Union, especially if Ukraine joins the EU.

China’s biggest energy company PetroChina (601857.SS) said Monday that its first-quarter net profit rose 4.7%, driven by more natural gas and a rebound in fuel demand.

Profit attributable to shareholders rose to 45.68 billion yuan ($6.30 billion), from 43.6 billion yuan a year earlier, according to a filing to the Hong Kong bourse. Revenue increased by 10.9% to 812 billion yuan.

Domestic rival CNOOC Ltd reported record quarterly profit on the back of stronger output growth, while the refining giant Sinopec Corp saw a 8.9% drop in income on the year.

Sinopec blamed ‘sluggish profitability’ in part on the petrochemicals business, despite stronger sales of fuel.

PetroChina said its crude oil output rose 1.4% to 239.6 million barrels and gas output rose 3.9% to 1,345 billion cubic feet.

China’s second largest refiner during the quarter processed 353.8 million barrels of crude, an 8.2% increase from the year-earlier period, when COVID lockdowns across China had left the world’s largest oil importer with no need to process much fuel at home.

The firm indicated an increase in domestic fuel demand due to the spike in travelling during Lunar New Year holiday seen in February.

Overall sales of gasoline, kerosene and diesel were up by 4.5% ent to 39.3 million metric tons.

Aviation fuel was up 36% followed by the increase of 8.2% for gasoline sales. On the other hand, sales of diesel fell 5.5%.

PetroChina also noted that although refining margins had narrowed, its chemical business was better, thanks to higher output.

Its natural gas marketing unit benefited from a 14% increase in sales to 83.4 billion cubic metres and lower import costs to pay for those imports, which yielded a 21.5% increase in operating profit to 12.3 billion yuan.

Its capital expenditure for the quarter increased by 10% from the same period last year to 55.97 billion yuan.

One of its parent company’s, China National Petroleum Corporation (CNPC), research arms forecast that China’s consumption of aviation fuel is expected to grow 13.1% this year thanks to a jump in passenger travel.

Diesel consumption, meanwhile, is expected to shrink by 1.8% due to other, more generalised economic woes.

Despite the strong results, PetroChina’s Hong Kong shares finished down 3.2% on Monday ahead of the announcement of its earnings.

For the year so far, the stock has rallied 41%, trouncing the Hang Seng index, which has gained 4.1%.

Such volatility in the oil trading markets reflects broader market trends in the energy trade.

Philippine petroleum company PXP Energy Corp (PXP.PS) will bid in an auction of the country’s energy reserves in its western and southern waters, which are not claimed by China, its chairman has said.

PXP Energy, which has exploration permits in the South China Sea’s Reed Bank where it has claimed vast oil and gas deposits, has been forced to shelve plans for exploration in the area after multiple setbacks with China, which also claims the area.

The company chose to bid for an energy ministry auction announced in February, including eight projects, with the nearby Malampaya natural gas reserve, which is running down – some forecasts say it will run out by 2027 – no longer seen as reliable.

Reed Bank was supposed to replace Malampaya, but exploration was suspended from 2014 to 2020 by two former Philippine presidents, after a 2011 stand-off between Chinese patrol vessels.

Although PXP Energy had previously attempted to work out a deal with China National Offshore Oil Corp for joint exploration, ongoing disputes between the governments of the Philippines and China were a roadblock.

‘We hope there will be a level of diplomacy that will come out of this,’ Pangilinan said. ‘We’re not a threat to them.

The Philippines is heavily reliant on foreign fuel to power its 110 million inhabitants.

Roughly a third of its imports are energy-related, which means it feels every rise and fall of global energy prices – a key factor for global oil trading.

Marcos Jr has since taking office in 2022 made efforts to improve relations with the US, to China’s annoyance: it has been bullying and harassing the Philippines in waters that both countries claim in the South China Sea.

Pangilinan, a business partner of the Indonesian tycoon Anthoni Salim in the Philippines, endorsed the methods President Marcos used to calm the situation in the South China Sea, pointing out the geopolitical background surrounding regional oil trading patterns.