Brent futures this week took us on a journey up and down, and currently stand slightly elevated to levels seen at the start of the week. That said, it’s gotten harder for Brent to cross into $86/bbl than it has been to convince people to board a Boeing flight. Now, $90 oil and even the hallowed $100 mark is a real possibility, with a J.P. Morgan note laying out the scenario for this, where $100 crude and $4/gal pump prices could be reached should Russia cut production further. Having seemingly learned the lessons of 2023 and laid low this year, the triple-digit seeds have now been planted in the minds of every analyst and trader. Money managers have been putting money where their mouth is, with the most recent CFTC data showing a net positioning increase of over 103mbbls (+26%) week-on-week, the largest since December. OPEC+ cuts, Red Sea disruptions, attacks on Russian refineries. It has very much been a supply story. Now for the macro to follow suit. When will the Fed cut? Are we there yet? It’s the hope that kills you.
In crude, we continued to see selling in the physical with sellers offering Brent, Ekofisk, Forties and Midland cargoes. This selling filtered into prompt Apr CFDs which saw multiple hedgers selling. However, Mar 27 saw price action recover on the back of support in the Apr/May Dated spread. Deferred DFLs have seen stickiness this week but the Q3/Q4 DFL roll saw buying in good size at 10c/bbl. Dubai saw a significant sell off which took May Brent/Dubai to the sub-zero handles. Finally, sweet US grades were predominantly rangebound this week whilst the May YV strengthened into positive price territory.
It was a rather bearish week for fuel oil. Although the 380 market weakened as players built shorts in front spreads, barges weakened further as selling in the crack saw a wave of stop outs in the front spread followed by fund and physical selling in cracks. As a result, European weakness pushed up the East/West. Sing 0.5 structure continues to get decimated as Apr/May Sing 0.5 traded down to $2.75/mt, while prompt cracks were generally offered.
In distillates, ICE Gasoil was weakened by US demand woes. Support was seen at $9.50/mt for Apr/May, with potential ARA buy-side interest. Russian gasoil oversupply persists, and floating storage remains full. Sing Gasoil shows E/W strength, supported by combo buying, while front spreads test contango. Euro Jet remains suppressed but stabilising, with interest mainly in front diffs and steady backend. There was decent combo buying which supported regrade and the E/W.
In gasoline, RBBRs have come off, softening spreads in both EBOB and Sing 92. In EBOB, people still want to own summer spreads despite May/Jun and Jul/Sep weakening with continued buying interest. In 92, MOC has been well bid over the week supporting cracks in the window. While cracks have come off with RBBR weakness, Q3 and Q4 cracks continue to be more bid. The E/W found support in the front amid Apr buybacks, RBBR weakness and a bid MOC, whilst gasnaphs were more offered in the front with Apr and May physical players increasing their hedging flows.
In naphtha, this week saw a shift towards the bear side with the Apr/May NWE spread, which has helped keep structure supported, giving way in the last couple days. There has been a correction downwards in both naphtha and naphtha cracks with Apr NWE crack very well offered. MOPJ spreads have been consistently offered, highlighting a strong appetite for players to take shorts into pricing with no signs of buybacks. In turn, April pricing in MOPJ could be very weak. E/W remains heavily offered as a function of Chinese demand relative to European demand for naphtha as a feedstock for petchems.
In NGLs the prompt arb rallied aggressively over this past week, but has seemingly reached a resistance point on the back of a weaker LST and physical demand still apparent in the East. EIA US propane stocks remained flat this week against expectation of a draw, casting a bearish tone for LST which saw flat price soften on a crude percentage basis. CP spreads have rallied in line with constant backend CP support, with eyes firmly affixed on the upcoming CP settlement value.
