We have been holding firmly in the $90/bbl levels for Brent this week, with investors poised for the Middle East situation to possibly deteriorate, which could involve Iran, the third-largest oil producer in OPEC. Levels rose more than 1% into Thursday after three sons of a Hamas leader were killed in an Israeli airstrike in Gaza, reigniting fears that ceasefire talks might hit a snag. Despite recent attempts to broker peace, this ongoing saga of conflict between Israel and Hamas seems far from resolution. The negotiations, now in their umpteenth round, have yet to yield any concrete agreements and prices seem quite sensitive to further headlines. Concerns over stalled inflation progress emerged from U.S. Federal Reserve minutes, prompting expectations for delayed rate cuts. With stronger-than-expected consumer inflation readings, investors now eye September for potential easing measures. With OPEC leaving its world oil demand growth forecast unchanged despite “robust” summertime demand, traders will look to the IEA’s report due on April 12 for further cues on the market.
In crude, we continue to see bullish play in the phys pushing it to +66c/bbl. Accordingly, prompt Apr weekly structure strengthened with the 15-19 Apr one week roll back at +20c/bbl. While DFLs also rallied initially, Apr 10 saw a sharp sell off in the May DFL and May/Jun roll by Chinese players. Brent/Dubai rallied into the week, moving to +11c/bbl on Apr 05 but seeing more quiet after this due to a national holiday in Singapore.
HSFO was driven by European weakness, which supported the 380 E/W to a high of $11/mt. However, buying in Q3 E/W pressured front 380 spreads. We saw aggressive hedge buying in 180 E/W which pushed the May Visco up to $18.50/mt. In VLSFO, Sing 0.5% continues to see weakness. Euro 0.5% cracks traded in line with Sing cracks and the E/W found buyside support at $40.50/mt, keeping Euro offered.
In distillates, ICE gasoil saw a week start with spreads and cracks opening lower but strengthening mid-week due to the Sing holiday. However, Apr 10 saw a sell off in cracks and spreads following bearish EIA stats. The E/W rallied due to better buying in Asia and weaker ICE gasoil, however, Sing gasoil spreads weakened in line with Europe. The European jet complex dipped on ample supply but summer demand continues to instill hope. Regrade remained rangebound in the front before seeing selling pressure with a large size offer on screen. Finally, HOGOs continue to be the weakest part of the middle distillates complex.
In gasoline, heaviness in European physical weighed on EBOB structure this week and the generally long market struggled to absorb the weakness. RBOB also struggled in line with weaker USGC physical premiums. The East was more illiquid with the midweek Eid Al-Fetr Holiday prompting disjointed liquidity. Arbs remained rangebound between 9.50-10.50c/gal. In naphtha, there continues to be weakness in structure. Supply from the AG and USGC continues to flow into Europe and there is little demand. Euro windows are offered and cracks were rangebound. In the East, crackers’ bids for MOPJ hit a ceiling around $700-705/mt, while petrochemical weakness persists, worse in Europe.
NGLs have faced weakness with LST and FEI structure coming off despite strength seen in crude. Consistent Q4 FEI/MOPJ buying above -$45/mt had led to market makers selling spreads in Cal’24. May/Jun FEI has tumbled to $1/mt but with the physical well bid, FEI/MOPJ bid at low levels and arb offered, a correction upwards could be seen shortly. In regards to CP, spreads have been consistently offered down the curve, with May/Jun trading at $14.50/mt.
