Paper Oil Sits At 106 While The Physical Barrel Is Near 130

On Friday in Bangkok, a day after the Labor Department posted the largest monthly jump in producer prices since March 2022, Federal Reserve Chair Kevin Warsh sat down with the IMF’s Kristalina Georgieva at the annual meetings and was asked about the Fed’s 28 October meeting — and the words the Associated Press carried were “I don’t prejudge meetings,” followed by a line that he does not believe in saying now what he might do for the rest of the year.

The number behind the question had been posted at 8:30 a.m. Thursday. The Bureau of Labor Statistics put September producer prices for final demand up 1.3 percent on the month and 6.3 percent on the year, against a forecast of 0.5 percent on the month per Saxo, with goods up 2.6 percent, final-demand energy up 10.8 percent — and gasoline, by itself, up 20.3 percent.

The Census Bureau posted September retail sales the same minute: up 0.8 percent to $745.0 billion, with gasoline stations up 6.4 percent on the month and 28.1 percent on the year. Saxo put the gain excluding fuel at 0.2 percent, and the control group at 0.1 percent against a forecast of 0.3.

Wall Street closed higher. The S&P 500 settled at 7,744.06, up 0.33 percent, and the Dow at 52,183.23, up 1.08 percent, while the Nasdaq-100 ended at 29,935.59, down 0.05 percent after a recovery of more than 500 points off its low, per Saxo.

The 10-year Treasury settled at 5.093 percent, down 10.1 basis points, per Newsquawk, and Saxo put the odds of a hike on 28 October near 15 percent on Friday morning against Newsquawk’s figure of about 30 percent during Thursday. Those are market probabilities, not Fed statements, and this letter cannot reconcile the levels.

Jeff Currie, who runs the investment firm Real Macro, went on Bloomberg television Thursday and gave the futures contract a name this letter will print in the next section.

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The name was “vibe contract.” Currie told Bloomberg that Brent is “not connected to the real world anymore,” and he pointed at how it is built — Brent settles in cash, while its American counterpart, WTI, requires delivery of actual barrels.

Bloomberg set the two prices side by side: Brent futures near $106, Dated Brent near $130, and Brent open interest earlier this month at its lowest since March 2025. Currie said the gap existed before the war and that the war had widened it, and he called the result “unpriceable risk” for the hedgers who most need the contract.

Thursday’s wires still quoted the futures.

Under the screen, the American side was crowded. Bloomberg, citing Kpler data, reported that trend-following commodity trading advisers had reached 100 percent of maximum long in WTI, and TD Securities’ Ryan McKay noted heavy rolling ahead of the November contract’s expiry next week; WTI settled at $97.97, up $2.88, while Brent settled at $105.92, down 14 cents.

The physical numbers came from the Energy Information Administration, which reported crude stocks down 8.557 million barrels against an expected draw of 0.3 million, per Newsquawk, and gasoline stocks up 3.518 million. Kpler’s Matt Smith attributed the crude draw mainly to production shut-ins after a hurricane hit the Gulf Coast, along with strong exports and higher refining activity, as Bloomberg reported it.

On the water, the two sides described different straits. Iran’s army chief, Maj. Gen. Amir Hatami, said Friday that Hormuz “remains closed,” while US Central Command said commercial traffic continues and that US forces and partners helped ship more than 19 million barrels of crude through it in a single day, per Gulf News live coverage. Central Command also said a container ship that sank in the strait this week was struck by an Iranian projectile; the IRGC Navy said the ship hit a naval mine. This letter attributes no attack to any party beyond what that party itself claims, and it cannot reconcile the two accounts.

Against that, IEA member nations pledged to complete the release of the 100 million barrels still outstanding from the March emergency action, Bloomberg reported, and Reuters, citing a US official, said the administration is studying an easing of sanctions on shadow-fleet vessels.

On the screen, Brent fell 14 cents. In the Labor Department’s ledger, gasoline rose a fifth.

Start with the pump. The Energy Information Administration put regular gasoline at $4.331 a gallon on 12 October, $1.27 above a year earlier, and the producer report did not stop at fuel: core prices, excluding food and energy, rose 0.7 percent on the month and 5.0 percent on the year, per Newsquawk, against forecasts of 0.3 and 4.4.

Then the lender. The 2-year Treasury settled Thursday at 4.757 percent, the 10-year at 5.093 and the 30-year at 5.430, per Newsquawk, with the 10-year touching about 5.04 percent intraday, a three-week low, per Saxo.

Gold was quoted near $4,154 an ounce in Friday’s Asia session, down about 0.4 percent, per Saxo. That is an intraday price and will have moved.

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