Brent skyrocketed from below $87/bbl at 01:25 BST on Apr 19 to flirting with $91/bbl just two hours later on the back of explosions heard from an Israeli strike on Iranian air space. However, resurrecting doubts regarding whether there is any actual wartime risk left to price, Iran’s downplaying of the incident spooked these bulls away, taking flat price back into its previous ranges. Into this week, the Jun contract held steady in the $85.50-87/bbl handles, until Apr 23’s EIA announcement took the market into a buy-side frenzy enabling the Jun futures to surge up to levels just shy of $89/bbl. The EIA announced a draw exceeding 6.4mbbls in US crude oil inventories after four consecutive builds. However, once again, price action immediately plummeted to $86.10/bbl, ultimately shifting into a slightly more supported version of rangebound land. It is interesting to see how quickly these events keep adding short-term choppiness to an otherwise directionally uncertain market. Technical traders would argue Brent is moving in an upward-shifting trendline, and they might be right. But with US GDP rising only 1.6% in Q1’24, the lowest rate recorded since Q2’2022 whilst the market continues to be risk averse over the conflict in the Middle East, we may continue to see price action ride shotgun in a driverless car.
In crude, the long/short battle continued in the North Sea with Gunvor still buying the physical against a major, refiner and producer offering. May CFD weeks saw better buying and we saw a recovery in May/Jun Dated from 65c/bbl to $1.10/bbl w-o-w. The Jun/Jul DFL roll rallied 10c before the market flipped to aggressively selling. Brent/Dubai has been exceptionally rangebound this week.
Eastern HSFO saw choppiness amid aggressive spread buying alongside 380 E/W selling. The spread buying led to good volumes bought in barge spreads, which supported 3.5% barge cracks. In VLSFO, buying continued in physical Sing 0.5 but spread selling pressured Sing 0.5 cracks. Euro 0.5 was weaker due to phys players looking to exit long positions while 0.5 E/W saw support across the curve.
It has been a sideways trending week in distillates. European ICE gasoil saw weakness in cracks while spreads appear to have hit a bottom. In Asia, sentiment remains fairly stronger with the May/June spread now out of contango. The gasoil East/West saw buying despite a higher freight throughout the curve. European jet has been rangebound all week while Asia’s kerosene and regrade were more volatile. Finally, heating oil futures spreads weakened further but the HOGO diff remains rangebound.
In gasoline, we saw the sell side sentiment continue as people who bought spreads and structure turned to the sell side, in particular, the May/Sep EBOB spread was pressured from $73.50/mt to $67/mt in a matter of hours early in the week. The prompt arb bottomed out in low 7c/gal handles, with Q4 arbs also well offered from hedging flows. The East has moved sideways with the front spreads stuck in a $1.65-1.85/bbl range.
In naphtha, the main story has been how well bid spreads have been. MOPJ has been leading the charge with several notable players seen short covering and trade houses remaining on the buyside pushing the front spread into $11/mt handles. We have also witnessed naphtha E/W rolling, helping to keep May/Jun NWE keep pace with MOPJ. Overall, it seems as if people are gearing up for a bullish May.
In NGLs, the story has been strength in the Asian and Middle Eastern complex with participants gearing up for a strong CP settle, whilst FEI has been supported on stronger demand. As a result, despite MOPJ strength, FEI has managed to keep up with the FEI/MOPJ trading rangebound. Despite some support in LST on bullish stats, the arb continued to be pressured, now down to -$200/mt in May.
