Europe oil/products: Brent falls off a cliff, European cracks bounce back

17 Jun 2021

London (Quantum Commodity Intelligence) - Brent fell off a cliff at 1550 UK time, but the crude future was already in a fast descent late Wednesday, and the sell-off Thursday, while aided by an unexpected rise in US jobless claims and a surge in the dollar index, was already in full motion.

Talk of $80/b crude over the summer may have added to the recent rally, but cracks for the main European products have also softened recently.

The ramp-up of US refinery activity looks set to swamp the European sector’s own recovery with excess diesel and naphtha arriving across the Atlantic, while crowding out the export of gasoline the other way.

By 1630 UK time, August Brent was at $73.14/b, down $1.80/b from the same time Wednesday.

But crude prices still remain above $73/b and the correction was more indicative of the current volatility in the market than direction.  

August Brent was only $0.13 higher at 1630 UK time than on Monday at the same time, but the backwardation between August and November Brent has widened from $1.97/b at the start of the week to $2.19 Thursday, even if it narrowed $0.07 from Wednesday.

Products

Naphtha cargoes in Europe were assessed down -$11.25/mt (-$1.26) to send crack values soaring, although there are reports that an influx of ten US cargoes is heading to Europe.

The continuing builds in US gasoline have been pressuring the market for several weeks. Eurobob continued to trade at $2-$3 below July paper, but the flat price for both spot and the curve failed to follow the crude tumble and cracks improved. E10 traded at flat and $3 above July paper. Premium unleaded gasoline barges traded at $578/mt to confirm a rise in ARA gasoline cracks.

Jet barges are trading above cargoes, which is usually a reflection of strong local demand, but with a sharp contango in the nearby curve it is likely a reflection of how much premium sellers are asking to sell barrels out of tank. Jet barges traded at $1.25/mt above the CIF cargo curve and were also offered at $20 above July LSG. Prompt arriving cargoes were offered at $2.75/mt below the cargo curve into Rotterdam.

Differentials for diesel cargoes versus July LSG edged higher but still remain low after the weight of imports from east of Suez and the US Gulf Coast. The market is still long, one trader said. The 50ppm barge market traded at -$4/mt versus July LSG.

Fuel oil, both high sulfur and 0.5%, continued to trade in very narrow ranges to set the price. Both fell less than crude, with high sulfur down $10/mt and 0.5% down $12.25/mt.