Euro oil/products: Brent flips to contango as Russia cap talks resume

25 Nov 2022

Quantum Commodity Intelligence - Brent crude was broadly flat in a thin Friday session, as the market structure flipped to a small contango at the front of the curve for the first time this year and talks resumed in Brussels over the Russian price cap.

The front-month January ICE Brent crude contract was $85.28/b by the London cash close, down $0.09/b on the day and $2.02/b lower on the week.

The second-month February contract was $0.01/b higher at the close, representing a contango structure for the first time since December 2021.

Structure has softened as attention in the market turns to oversupply.

EU and G7 officials have so far failed to agree on a price ceiling for Russian crude exports, which were reported earlier this week at $65-70/b.

At that level, it would most likely maintain Russian crude exports close to current levels, removing much of the supply concerns after EU sanctions on 5 December.

A short trading week in the US because of Thanksgiving has added to volatility this week, while liquidity in product markets has been thin.

Distillate and gasoline cracks both fell Friday to fresh recent lows, as demand falters against prompt supply.


Naphtha cracks slipped on Friday but ended the week close to recent highs around $12/b below ICE Brent on firm fundamentals. Cash assessments were pushed slightly lower by renewed selling interest, with naphtha cargoes marked in line with a Rosneft offer around flat to December swaps,  offered naptha at the front-end at flat to swaps, down $2.75/mt on the day at $648/mt.

Gasoline fell to a fresh 2.5-month low on renewed oversupply concerns, as liquidity eased again. Totsa and Trafigura sold 8kt of oxy E5 barges to Varo and Shell at around $10/mt against the paper, broadly flat on the day. And Totsa sold another 4kt of non-oxy E10 to Gunvor at a $25/mt premium to swaps, from $29.25/mt the previous day. Shell sold a premium-unleaded barge to BP at $757/mt and another at 774/mt, both on 3-7 December dates, and were assessed in line with the latter.

There were three bids and one offer for jet cargoes on Friday, with the bid from BP into IOG valued at $28/mt over swaps ($1,012/mt CIF) being hit by Totsa. An unmatched offer from Shell at $34/mt over swaps was valued at $1,014/mt into Le Havre. Taking into account market structure, Quantum assessed down $13/mt on the day at $1,016/mt, leaving cargoes valued at $99.50/mt over December LSGO versus $107.50/mt on Thursday. In the barges, a bid at $106/mt over barges meant barges were valued almost $14/mt over cargoes at $129.75/mt.
Diesel was thinly talked the day after Thanksgiving with no deals heard and no indications in the cargo market in the north and Glencore offering a Lavera cargo in the Med at $25/mt over swaps in the med for Dec 5-9 delivery. That tested value and crushed the cash differential leaving ULSD at $961/mt CIF Med, down $17.50/mt on the day. In the north, cargoes were assessed at $977/mt, down $8/mt on the day. Gasoil was a similar picture as swaps fell day on day and there were no indications heard in the North and just a bid of $8/mt under swaps seen in the Med. Gasoil was assessed a few dollars lower based on softer swaps. ULSD barges were bid at $9.50/mt and offered at $21/mt. Quantum assessed at $15/mt over, up $3/mt on the day, at $932/mt.

OEI was the buyer for at least three 0.5% marine fuel barges during Friday’s window, booking the front end at $544/mt FOB ARA and the mid-window at $543/mt. With the latter taken as value, Quantum’s outright assessment recovered $11.50/mt from Thursday and closed a volatile week up 4%. DMA for December/January was valued at -0.50.

There were again no fresh deals in the ARA 3.5% fuel oil barge market to end the week, with a wide bid-ask spread along the curve leaving differentials unchanged from Thursday. Moves in the paper market left Quantum’s outright assessed $2.75/mt higher day-on-day at $351.75/mt.