Europe oil/products: Distillates tumble again, dragging Brent and oil complex lower

28 Jun 2021

Quantum Commodity Intelligence - European distillate futures led the oil complex lower Monday, dropping more than Brent, as concerns over the impact of the Delta variant of Covid coincided with a long global distillate market.

Front and second month Low Sulfur Gasoil futures fell $7/mt ($0.94/b) by 1630 GMT compared to Friday.

August Brent was down $0.74/b over the same time frame to trade at $75.15/b.

Backwardation narrowed with the spread between August and November Brent slipping to $2.21/b from $2.38/b on Friday.

Although concerns over the impact on aviation was making headlines, jet cargo prices in north Europe kept in line with Brent rather than follow Low Sulfur Gasoil futures lower.


Naphtha cargo prices and swaps followed the drop in crude. Asia is expecting to see an increase in arbitrage volumes in July, rising from 2 million mt in June to over 2.5 million m/t as three new crackers in South Korea and China ramp up operations, sources said. But the rise will be largely met with barrels from the US Gulf. Vitol has put a suezmax tanker on provisional charter to load 120,000 tonnes of naphtha from Amsterdam-Rotterdam-Antwerp to Japan later this month, sources added. The July spread between naphtha cargoes in north Europe and Japan was pegged at $13.25/mt, little changed from Friday.

There was a mixed bag of falls in the gasoline barge market in ARA, with E5 down $5.50/mt ($0.66), gasoline E10 down $8/mt ($0.96/mt), and premium unleaded barges down $7/mt ($0.84/mt). Eurobob E5 strengthened during the day against July paper, trading flat in the morning at a premium of $3/mt in the afternoon. But cracks in the Eurobob forward curve all softened, with July paper down $0.28/b and October paper down $0.43/b, wiping out the gains since last Tuesday.

Jet cargoes traded at July plus $20.50/mt into Le Havre, but were also offered at July plus $19.50/mt into Rotterdam. Differentials nudged higher to mitigate the underlying distillates softening more than Brent, keeping cracks the same. But jet cracks in Asia were under pressure earlier amid the increase in Covid infections.

Diesel barge trade in ARA drew a blank again to reflect the lack of demand. Freight rates in ARA softened amid the dearth of activity, brokers noted. Spot cracks for diesel continued to slide, down another $0.19/b Monday, after starting the month at around $6.50/b. But cracks in the forward curve also fell Monday. Fourth quarter cacks were still rising until June 16 when they started to edge lower.

Fuel oil activity remained thin. High sulfur fuel oil barges traded 6,000 mt at $404/mt, and marine fuel 0.5% sulfur traded 6,000 mt between $515/mt and $516/mt.