Brent futures found some relative stability this past week, indicating a lack of clear axe from both the bulls and the bears. Prompt Brent futures climbed to $78.29/bbl on Jan 12 and continued to settle in the following days around the $77/78/bbl-handles. Initial support was found on the back of further intensifying tensions surrounding the Red Sea conflict, with US and British forces launching airstrikes on Jan 12, before the Houthi rebels retaliated by firing an anti-ship cruise missile at USS Laboon. A deep freeze was seen across the US Gulf Coast, closing the Port of Freeport (ironic) in Texas, as well as decreasing North Dakota’s oil production by between 650-700kbbls due to freezing equipment. Nevertheless, the 240kbbls/d Phillips 66 crude unit situated at the Bayway Refinery still managed to be hit by a fire and an explosion, although operations were reportedly unimpacted. The EIA announced a stock build in gasoline and distillates, increasing by 3mbbls and 2.4mbbls, respectively. In contrast, crude saw a draw of 2.5mbbls and Cushing storage recorded back-to-back draws, however, this week’s was to a far greater extent of over 2mbbls.
In crude, we saw the physical strengthen to the highest it has been since Oct 2023 with all cargoes being bid up, most notably by a Chinese player and a trade house. The same two players were also noteworthy buyers of the Bal-15-19Jan and 22-26Jan CFDs. In CFD rolls, we saw a refiner selling the 08-14Feb vs Cal Mar roll to a trade house. The prompt Dated spread has found support and we saw this strength filter into Mar/Apr spreads due to a major buying, pushing the Mar/Apr DFL roll into positive levels. The Q2’24 Brent/Dubai rallied from 38c/bbl on Jan 11 to 90c/bbl on Jan 16 over aggressive buying in Q2’24 Brent/Dubai. Finally, we saw a supportive week for US grades over the cold spell in the US disrupting supply.
The weakness in HSFO grew more acute, especially in Europe, implying E/W boxes higher. We saw the Feb 380 E/W trade as high as $14.50/mt with market makers on the buy-side and phys players taking profit on the sell-side. VLSFO saw more bullishness emerging out of escalating Red Sea tensions bringing about spread buying in the prompt Sing 0.5 and subsequently in the Euro 0.5 barges by a mix of phys players. The 0.5 E/W was implied higher by support for back-end E/W buying.
In distillates, we have seen support from the ongoing troubles in the Red Sea. The ICE gasoil saw strength amid some downward price action. Sing gasoil also saw support on the back of refinery maintenance in the region, amid trade houses seen buying. The E/W contract was left overall rangebound in the front although Q2 E/W remains rather strong as stronger Asian and weaker European fundamentals are expected. Regrade and HOGOs have been both rangebound.
Gasoline, has been rather macro-driven over the last week. The front EBOB spread was trading from -$4.75/mt on Jan 09 and opened at -$2.50/mt on Jan 16. Amid macro-driven sell-offs in RBOB, RBBR, and Brent futures, the TA Arb traded lower. 92r was more quiet. There was physical bearish play in the front and more strength in spreads down the curve as the May/Jun spreads traded at $12.12/bbl on Jan 17. Gasnaph initially came off, pressuring European gasoline and lending strength to the Arb. However, this weakness quickly reverted. In naphtha, there was a weaker tone to cracks and spreads across the week, although, further disruptions to shipping operations in the Red Sea and the Strait of Hormuz have seen the E/W rally. Cargoes that were meant to go East have started heading back to ARA, prompting a reverse arb. Trade houses and majors were seen buying the Feb E/W up to $30/mt. Despite issues, MOPJ windows have not been well bid, suggesting that supply concerns are a tired well-priced in narrative. Summer and more deferred gasnaph buying have dominated crack price action, with a near $20/mt rally suggesting naphtha weakness.
NGLs have had a freight driven week, which saw the FEI/CP get bid down, and the arb rate get bid up from freight coming off around $50/mt. With extreme temperatures in the US hiking up LST prices, the arb was implied stronger and was further bid up by shipowners and importers, locking in the arb at cheap levels. Butane also rallied this week, but still lagged behind propane strength.
