Europe oil/products: Crude rally fails to dent buoyant products cracks

10 Jun 2021

London (Quantum Commodity Intelligence) – Crude futures ticked higher Thursday afternoon in Europe to maintain their momentum, and European product cracks largely kept pace, buoyed by OPEC's bullish stance on global oil demand growth, and shrugging of the spike in US inflation.  

Brent futures for front-month August were trading at $72.53/barrel at the Quantum 1630 London timestamp, compared to Wednesday’s settle of $72.22/b.

July WTI was trading $70.26/b, versus Wednesday’s settle of $69.96/b.

Earlier on in the session, Brent reached fresh two-year highs of $72.92/b on upbeat US data showing a fall in unemployment claims.

Meanwhile, the spike in US inflation to 5% year-on-year in May, and also 0.6% month-on-month, failed to move the 10-year bond market, suggesting the current figures are increasingly viewed as a blip rather than a trend.

Low-sulfur gasoil futures rolled and the new July front month was up $2.75/mt on the day to around $589.75/mt at 1630 London time. 

Deliveries into the expiring June contract, which closed at $585.25/mt, were the lowest in 13 years at just 25,000 mt, according to ICE data.

Products

Spot delivery CIF NWE naphtha was assessed flat Thursday at $622.50mt, while the front-month July swap was assessed $1.75/mt higher at $615.50/mt. Prompt naphtha cracks weakened slightly amid increasing crude oil futures and reports of a small stock build in ARA.

European gasoline prices continued higher helped by ARA stocks data showing a 4.5% drop, said sources. E5 barges were heard traded at differentials between $2/mt and $3/mt below the July swap and buying interest was heard late afternoon at $675/mt. Nine barges of premium unleaded product were heard changing hands at $677/mt.

Jet fuel prices in Europe moved higher, tracking gains on LSGO futures and the wider distillate complex, all of which saw improved refining margins on the day. A CIF NWE cargo was heard traded at a premium of $20.50/mt to July LSGO, but similar loading dates were offered on at $20.25/mt without attracting further buying interest. The swaps curve moved up in tandem with spot jet and LSGO futures. Jet fuel stocks in ARA were down 2% on the week, said market sources.

Gasoil and diesel strengthened in line with underlying LSGO futures although activity on the cash market was subdued with the June futures expiry earlier in the afternoon. Cracks for both distillates increased all along the curve maintaining percentage relationships to Brent crude amid a drop in stocks in the ARA hub over the last week.

Fuel oil cracks rebounded Thursday despite higher Brent crude futures, with the margin for the HSFO barge July swap assessed $0.48/mt higher at -$10.94/mt. A fall in stocks in ARA of around 4.5% over the prior week was supportive. Spot prices made similar moves higher, although low sulfur marine fuel was slightly less buoyant.