Onyx Research

Our team of skilled analysts, by utilising the depth and breadth of Onyx's proprietary data, position ourselves at the cutting edge of market analysis. This unique vantage point grants us an unparalleled perspective in the market, enabling us to identify emerging trends and lucrative opportunities.

The Cheltenham Crude Cup

4 min read

The Brent complex saw initial support stemming from renewed tensions in the Middle East as well as bullish fundamentals including a strong demand for prompt crude. However, recently price action for the May future has gone against the bookies and has fallen from the highs of over $84/bbl to oscillate in the $82/bbl handles. On Mar 03, OPEC+ announced it would extend its voluntary oil output cut of 2.2mbbls/d further into Q2’24, with Saudi Arabia vowing to continue its voluntary cut of 1mbbls/d through to the end of June, leaving the nation’s output at around 9mbbls/d, leaving OPEC to look on like a proud Willie Mullins. The Galopin Des Champs of the oil world also did not flinch this week and decided to raise its April OSP differential for Arab Light crude to a premium of $1.70/bbl to the Oman/Dubai average, marking a 20c/bbl increase from the previous month. OECD countries notably saw their crude oil inventories slumping to their lowest seasonal levels since the post-pandemic, according to Kpler data. In addition, the US is also trying to pass a bill to prohibit China from buying its crude oil from its SPR. On Mar 06 the EIA announced a sixth consecutive US crude stock build of 1.4mbbls, compared to median estimations of a 2.7mbbls build. Moreover, another crew was forced to abandon the ship after being hit by a suspected Houthi missile attack, killing at least two sailors. Overall, Brent seems very satisfied with itself and happy to oscillate around $82 and $83/bbl handles. As we move towards Cheltenham, crude may need a Constitution Hill-esque factor to inspire some directional movement in the market.

In crude, the North Sea market saw a bout of weakness with the physical being consistently offered. Consequently, the Bal-Mar DFL gapped down by over a dollar this week with prompt CFD rolls hammered. What’s more, consistent hedge selling flows in Cal-Mar Dated/Apr Dubai further pressured the Dated structure. On the other hand, Dubai crude was well supported as Dubai spread buying exerted substantial pressure on the Brent/Dubai structure. Brent/Dubai rose 65c/bbl but gapped down to 15c/bbl whilst Brent/Dubai boxes capitulated, especially in Apr/May and May/Jun which fell below -10c/bbl.  

Eastern HSFO has seen a stronger week with participants across the board buying the complex. Mar/Apr 380 still gapped up to $1/mt, from the -$5/mt levels seen last week. Euro HSFO saw an illiquid week. Although initial buying was observed, the Euro 3.5 barge complex sold off aggressively with the Mar 3.5 barge crack selling off to -$10.60/bbl. Asian VLSFO was better offered in the last week with Apr/May selling down from $10.75/mt to $7.50/mt on the back of observed stopouts. Euro 0.5 initially saw a strong start to the month in line with a strong phys. However, the latter weakened and the front 0.5 barge crack came down to -$0.25/bbl.

In distillates, the European gasoil complex has reached what seems to be a bottom as prices were found support around the $20/bbl mark, for the Apr crack. Bullish stats as well as ongoing Middle East tensions have continued to floor the contract. However, the short-term view still sees demand being lukewarm. Sing gasoil has remained very weak even if there was some buying interest. The gasoil E/W was dragged down overall. Regrade saw mixed sentiment with more buy-side interest entering at the end of last week and at the start of this week, as the Apr regrade reached -$1/bbl on Feb 29.

The gasoline complex in both curves has softened this week, with Apr EBOB cracks falling by $3.50/bbl, a good barometer for the movements in structure. E/W has sold off a long way on the back of particularly weak cash, settling at -$2.07/bbl on Mar 04, as well as selling in Apr/May Sing 92. However, some short profit taking in Apr E/W has implied pressure onto EBOB.

In naphtha, eastern demand optimism has kept cracks and spreads strong, with NWE still performing despite bullish factors seemingly priced in. E/W structure has seen support with Apr TC5 freight rallying, suggesting there is demand for vessels to move product to the Far East. Gasnaphs have weakened on the back of the return of refineries bringing reforming capacity back online. Overall spot demand remains apparent with the market being kept short of barrels for a number of reasons.

This week in NGLs, We saw LST continue to trend lower. There was some short covering by the global US trade house which briefly supported spreads though with EIA stats flat on the weak, expectations of lower demand are creeping in and weighing on the market. FEI was overall very quiet with the morning windows lacking any gusto and as such, the arb was largely driven by LST flows. FEI/CP has been well offered in the front while seeing some better support in the backend. Likely players are anticipating another high CP settle Butane rarely tracked the trend in LST spreads, correcting lower in the week.

Subscribe to Edge to unlock this Research

Edge is the proprietary research arm of Onyx: the #1 liquidity provider of oil futures
OR

Share on

Traders also read...

Follow Us

Our team of skilled analysts, by utilising the depth and breadth of Onyx's proprietary data, position ourselves at the cutting edge of market analysis. This unique vantage point grants us an unparalleled perspective in the market, enabling us to identify emerging trends and lucrative opportunities.