Crude prices were humbled this week and came back to earth as traders discounted geopolitical risk whilst macroeconomic headwinds lingered. Starting the week at $87/bbl levels, July Brent futures progressively fell lower, seeing lows of $83.53/bbl on Wednesday, before correcting up to $84/bbl levels on Thursday. Bullish traders were sick of holding the bag, and once it was clear that the Israel-Iran conflict was not going to escalate further and cause supply disruptions, it was time to liquidate. Money managers reduced their long positions, whilst crude ETFs saw a flurry of outflows as open interest collapsed, and put premiums surpassed call premiums once again. Refinery margins have not been looking so healthy with gasoil slacking off, and this has filtered into bearish sentiment in the physical crude markets, with the Brent expiry weaker than expected. Interest rates are set to be higher-for-longer, the US dollar is stronger-than-ever, and what the OFAC? Another catalyst was a really bearish EIA stats announcement, revealing an enormous build in US crude inventories of 7.3mbbls. All of a sudden, OPEC+ are feeling like extending their cuts now, kicking that can down the road. Sentiment changes quickly, and playtime is over for the bulls.
Crude saw a dramatic turn when Gunvor flipped to selling the North Sea physical, selling Midland and Forties cargoes aggressively. In CFDs, prompt May structure sold off substantially alongside the May/Jun Dated spread. Jun rolls, however, remained supported. The Jun/Jul DFL roll dropped from +9c/bbl to -2c/bbl w-o-w and we saw bank buying in Q3’25 and Q4’25 DFLs. Brent/Dubai began May with a sell off to -8c/bbl on May 02 whilst Dubai spreads strengthened. In US grades, Jun HTT and MEH strengthened whilst prompt Midland saw pressure.
In HSFO, despite lower volumes for 380 spreads given a lack of Chinese players, May/June 380 rallied to $6.50/mt, with front 380 spreads further supported by aggressive bids in the physical. Flat price buying and Q3 barge crack buying supported barge spreads, however, these spreads were also thin. In VLSFO, the fates of 0.5 barges and the E/W diverged due to European weakness, with a European major continuing to sell Euro 0.5 spreads aggressively, putting major pressure on deferred E/W boxes.
Distillates this week were dictated by low liquidity and uninspiring price action. ICE gasoil spreads saw support in contango, whilst cracks continued to weaken. Sing gasoil was hammered down with Chinese export quotas coming out worse than expected. The E/W also weakened across the curve. In Euro jet, we saw weakness in the prompt amid oversupply and limited interest in the backend. Regrade has also traded sideways whilst kero spreads are in a deep contango in the front. Finally, while the prompt HOGO trended upwards, backend HOGOs came off.
Gasoline witnessed a week of two halves, as structure went from bid to offered. Weakness in crude filtered into the futures market causing the RBOB screen to feel the pressure. In combination strong buybacks in the Jun arb led to a softer EBOB complex. Sing 92 summer spreads traded within a 1.80-1.85/bbl range, with the moves less exaggerated in comparison to EBOB.
In naphtha, the main story this week has been a potential bull play in May, with the May/Jun NWE spread witnessing relentless buying up to $18/mt. However, more deferred tenors are looking wobbly with players not convinced this strength will be reflected in later months. Moreover, a Cal’25 FEI/MOPJ buying flow could apply significant pressure to naphtha cracks.
In NGLs, despite a less pronounced build in stocks than expected, LST and LST/FEI sold off. This was likely due to hopeful sentiment in FEI and CP amid low crude and low FEI flat price levels. In addition, the E/W has seen strength from FEI buying. A weak CP settle triggered selling in CP spreads although flat price sees support due to low crude. FEI/CP came off, however, we have recently seen buying at $38-40/mt. Finally, Saudi butane saw incredible weakness this week while US butane strengthened up to 0.625c/gal.
