The market has been uninspired over the last week across the oil complex, a bit like the dull Tarantino movie “Once Upon a Time in Hollywood,” amid a now-ended IP week, which dried up markets and overflowed the Mayfair pubs. Despite the mundane narrative thus far, attentive traders will know to stick till the end of the show. Although prices were relatively unchanged, with the May Brent futures contract trading around $81.50/bbl on Feb 20, reaching lows of $80.80/bbl on Feb 23, the contract found better support and closed at $82.10/bbl on Feb 28. From a macro perspective, new data has flooded in but nothing much changed, leaving a cap on the oil market as there is ongoing proof of a recession in Europe, with the UK seeing insolvencies spike as well as a still-contracting manufacturing PMI at 47.1, the latter of which was also seen in Germany. Despite economies seeming more asleep than people through an uneventful two-hour movie, the ongoing conflict helped support prices and threw hints that the premium is still attractive, as much as Tarantino’s feet close-ups. EIA data also left the market with no clear direction as the organisation announced a 4.2mbbls build, compared to 3.1mbbls expected, with prices for the Brent and WTI contracts actually strengthening by the end of Wednesday. We think it is worth sticking around as expiry is around the corner, with IP week coming to a close, as a great ending of the month could see Brent’s strength in February spill into March, as much as a good-old Tarantino ending with a gruesome blood spill making the two-hour wait worth it.
In crude, the phys diff was sold aggressively over the week amid multiple parties offering WTI Midland cargoes. However, we saw a European major bidding up cargoes and buying up the cash spread aggressively. While last week saw sell-offs in the Mar/Apr Dated and the prompt CFD rolls, the Mar DFL surged up to $1.60/bbl this week on account of thin liquidity. Still, prompt CFD rolls remained pressured. Dated structure was initially sold off, but rallied amid a strong Brent structure and a supported Dated physical market. In Dubai, sentiment was rangebound with keen buyers of Mar Brent/Dubai coming in at $0.30/bbl and sellers being seen around $0.50/bbl.
The HSFO Eastern has been uninspired over the last week with prices for the Mar/Apr 380 trading between -$5.75/mt and -$5.25/mt. The Euro HSFO market saw more weakness over the last week as good selling was observed for the Mar/Apr barges and the Mar/Apr crack roll. The Asian VLSFO complex saw more direction as the Mar/Apr Sing 0.5 reached $9/mt more bid. Cracks were also bid amid spec players adding length. The European counterpart was similarly supported, as the Mar/Apr spread reached a high of $8.75/mt. 0.5 E/W sold off on the back of cross-arb selling from a mixture of physical players.
In distillates, it was particularly bearish for European gasoil structure as cracks saw a significant sell-off on the back of weaker demand, whilst there has been less wholesaler participation during the physical windows, indicating muted demand. As a result, this actually saw the East/West and regrade supported on the back of combo buying amid weaker flat price. A weak stats announcement on Wednesday extended this bearish pressure.
In gasoline, in the week to Feb 29 the RBBR was weak and softening RBOB spreads helped withdraw some strength from EBOB. Mar/Apr EBOB fell to -$32.50/mt on Feb 29. The TA arb has seen mixed flow with good selling in the prompt seeing good buying around 9.40-9.80c/gal and Q2 has seen real selling around 8.70c/gal. The E/W was better offered down the curve and there was real physical selling of the 92 spreads, although there was MOC bidding holding up prices.
The naphtha market is set to likely attract bullish interest. NWE naphtha saw strong buying momentum. On the other hand, MOPJ saw Easter trade houses and Chinese players selling the spreads on the back of uneconomical PDH margins and sluggish cracking demand. This prompted the Mar E/W to tank as low as $11.50/mt.
This week in NGLs, LST was weaker due to selling by midstream players and producers but LST premiums saw support post-bullish EIA stats announced on Feb 28. FEI weakened over news of nine Iranian cargoes being diverted to the East but structure remained firm amid good demand signals in the physical window. The E/W weakened on the back of FEI weakness and European strength. CP has been very well bid ahead of Mar’s expiry, placing pressure on FEI/CP. Finally, US butane has been better bid than LST despite the near-end of winter-spec gasoline blending season.
