Europe oil/products: Distillate prices and cracks quickly soften after EIA report

14 Jul 2021

Quantum Commodity Intelligence -  Front-month Brent was still trading Wednesday above $76/b at the 1630 London timestamp, although crude prices slumped shortly afterwards when the delayed release of key US statistics showed crude production and exports up, even as stocks were drawn down.

Distillate futures reacted quicker than Brent after the Energy Information Administration showed a 3.7 million barrel build in US distillate stocks over the week to July 9.  

August and September Low Sulfur Gasoil futures were down $0.50/mt by 1630 London time from the same time Tuesday. 

Meanwhile, September Brent was trading $0.23/b higher by the late afternoon 1630 marker compared to Tuesday. 

The divergence was reflected in European oil products, with middle distillate prices and cracks dropping, and the flat price markets of gasoline and fuel oil showing gains. 

Despite the headline-grabbing 7.9 million barrel drop in crude stocks, total US commercial oil and products stocks were up 2.5 million barrels over the week even with a drop in refinery utilization rates.


Naptha cargo prices in northwest Europe were assessed $2/mt (-$0.22/b) lower as the backwardation eased slightly between August and September paper to -$9.75/mt, down from -$10.25/mt Tuesday. But propane cargo prices edged $2/mt ($0.15/b) higher. Propane stocks rose 1.6 million barrels in the US last week, according to the EIA.

Backwardation was easing in the Eurobob gasoline E5 market during the day, with trades seen at $5/mt above August paper, down from $7/mt on Tuesday. The spread below E10 widened after the grade continued to trade at $9/mt above August paper. Premium unleaded gasoline barges were trading at $737/mt and $738/mt at the close, up $4.50/mt ($0.54/b), and E10 was also assessed $4.50/mt higher than Tuesday, but E5 was only $1.50/mt ($0.18/b) higher.

Jet fuel prices and cracks gained for the second day in a row. Bids for a cargo of jet into Le Havre hit $26.25/mt above front-month Low Sulfur Gasoil futures, but there was still a lower offer into Rotterdam at $25/mt above August.

With Low Sulfur Gasoil futures softening more than Brent at the time of the close, middle distillate cracks softened. There was only $1/mt of contango between August and September LSG, and there was little structure in the diesel barge curve with a prompt lot trading at -$2/mt versus August LSG and a later loading barge at -$1.75/mt. Heavy rains have increased Rhine water levels, but liquidity is very thin, and brokers noted cross-harbour ARA barge freight rates were softening.

High sulfur fuel oil barges were up $4.25/mt ($0.66/b) and marine fuel 0.5% barges were up $4/mt amid backwardation in both nearby curves. The prompt spread between the two grades was $125.5/mt, which was almost replicated across the first six months of the curve, with January paper showing a spread of $124.75/mt.