With Donald Trump currently marginally ahead at the polls and the first presidential debate against incumbent Joe Biden scheduled for tonight, it’s currently anyone’s guess as to whether he can play it Cool(idge) and convince the US electorate of his self-proclaimed Tru-man status and maintain his lead. Whilst the prospect of either candidate being able to ‘Make America Great Again’ is up for debate, the US dollar seems to have already got the message, with the US dollar index reaching 106, its highest level in 2 months. Conversely, the Japanese yen hit its lowest level since 1986, with a $100 Bill (Clinton) now worth over 16,000¥. Who knows if the Bank of Japan can Nix(on) the collapse, given they may struggle to af-Ford many further major currency interventions. In oil markets, we’ve seen Brent futures trade sideways around $84-85/bbl, with no major moves Grant-ed as all fledgling break-outs have been consistently Hoover-ed up in the past week. The mogas arb’s price has been Hard-en-ing, being Bush-ed up to 10.40c/gal from 8c/gal, however the opposite was true for Aug’24 Brent/Dubai, which Eisen-lowered from -10c/bbl on 20 June to -25c/bbl on 27 June. Shockwaves were also felt on 26 June with the EIA’s US inventory stats release, where despite a predicted 2.8mb draw, we saw the US Fill-more of its crude storage to the tune of 3.6mb. Market participants hoping for a bullish regime to come Ba-ra-ck will have been sorely disappointed.
In crude, the North Sea physical surged to 138c/bbl driven by bids from Gunvor and Trafigura, before sell-side interest from Aramco and others pushed it down to 105c/bbl, while CFDs saw strength early in July, peaking at 50c/bbl before resistance led to selling from Geneva houses. DFLs peaked at 93c/bbl but fell to 50-60c/bbl amid Brent spread sell-offs, and Brent/Dubai saw the August contract drop from -10c/bbl to -25c/bbl, with sideways action in the Aug/Sep box around -11c to -4c/bbl.
In the European HSFO market, there was notable sell-side pressure with spreads narrowing, particularly in Q3 and Q4 of 2024, leading to a drop in July cracks to -$9/bbl and mixed interest in E/W spreads, while 180 markets weakened due to significant selling, driving Jul/Aug visco box prices down to -$2.75/mt. Conversely, VLSFO saw bullish trends, especially in the East, where spread buying in Jul/Aug/Sep pushed up cracks to $11.50/bbl following the Dangote refinery fire, and despite a balanced market at $11/bbl, the Euro 0.5 spread remained strong with Sep/Dec rising to $13/mt.
In distillates, ICE gasoil rallied on cracks and spreads, with September swap cracks climbing from $21.20/bbl to $22.90/bbl despite sell-side interest in ARA barges, while Sing 10ppm gasoil premiums fell sharply, affected by swing barrels favoring the West. European jet weakened to $57/mt against ICE gasoil, and while regrade premiums recovered to flat from an initial discount, HOGOs remained rangebound amid strengthening heating oil futures but limited arbitrage opportunities.
This week, gasoline saw limited liquidity and movement, with notable activity in EBOB front spreads where a major pushed July/Aug to around 70c/mt, countered by trade house selling; supply disruptions from Dangote, Galveston Bay, and French strikes provided short-term momentum but not long-term shifts. The TA Arb market has seen a huge rally with physical players selling.
Bullish momentum continued across the naphtha market this week. Price action rallied on all fronts, including cracks, spreads, and flat price. South Korean tenders, reduced exports, and Ukrainian attacks on Russian oil infrastructure have all contributed to supply tightness concerns. Crucially, the July MOPJ flat price surpassed $700/mt, a massive resistance level during previous rallies.
In NGLs, US LST propane rallied after a smaller-than-expected build in PADD3 stocks despite an overall 2.1mb build, leading to support in the Q4’24/Q1’25 LST spread at 1.875c/gal and fund selling in Jul/Aug, while weaker Conway propane saw its discount to LST widen to -4.50c/gal. NWE propane remained strong, aided by robust naphtha, with bullish USGC stock data potentially boosting NWE demand, and while US butane prices weakened, the difference between CP propane and butane spreads softened, driven by flat price selling and changing recommendations.
