Europe oil/products: Eurobob turns corner, but jet cracks slide

21 Jun 2021

London (Quantum Commodity Intelligence) - Eurobob gasoline looked to have turned a corner Monday, trading flat to the front-month swap, following another afternoon rally in Brent to extend last week's high volatility. 

The surge in crude was likely triggered by Brent dropping below $73/b early afternoon, while sentiment was emboldened by Iran’s election of a hardline cleric, likely to further delay an agreement on lifting sanctions.

By 1630 UK time, August Brent was trading at $74.35/b, up $0.79/b from Friday. 

US traders were also buoyed by the Chicago Federal National Activity Index rising to 0.29 points in May from -0.09 points in April. 

The index combines 85 different indicators to provide an overall picture of economic activity, and soothed concerns about the hawkish comments made by the Federal Reserve Friday. 

But backwardation also widened with the spread between August and November Brent trading at $2.44/b as European markets closed, up from $2.27/b on Friday, to demonstrate the tightness. 

Dated Brent saw a rise in FOB bids for barrels loading in the North Sea, although there was a lower trade and offer for CIF Rotterdam after adjusting for freight.

“The rebound in demand in the northern hemisphere summer is so strong that the market is becoming increasingly concerned about further sharp drawdowns on inventories. This comes as OPEC treads a cautious path back to normal output levels,” said Daniel Hynes, senior commodity strategist at ANZ.

Products

Naphtha trailed behind crude, with prices rising $4/mt ($0.45/b). Backwardation between July and August paper narrowed from $8.50/mt Friday to $6.25/mt. The July spread between north Europe and Japan narrowed to $11.75/mt Monday, down from $12.50/mt on Friday, while August narrowed to $11.75/mt, down from $12.75/mt on Friday, according to data from brokers.

Eurobob E5 gasoline barges traded at flat to the July paper throughout the day, up from a discount of -$3 on Friday, and even lower earlier last week. The spread to E10 barges narrowed, with the market trading at $2.75/mt above the July paper. Premium unleaded barges traded several lots between $691 and $692/mt. Cracks for the swaps curve for Eurobob matched the rise in the Brent curve.

The jet cargo market traded at $19/mt above July Low Sulfur Gasoil futures to set the assessment. The flat price for cargoes gained only $1.25/mt ($0.16/b) and spot cracks softened $0.64/b. The July crack also softened to $0.40/b and August cracks dropped to -$0.33/b.

After a few blank days last week, including Friday, the diesel barge market traded 12,000 mt between -$2 and -$3 versus July LSG. Diesel cargoes into ARA were bid at $3 and offered at $3.25 versus LSG. ARA barge freights have dropped lower in June because of the lack of activity, brokers noted.

Trade was thin in high sulfur fuel oil barges, with 6,000 mt changing hands around $395.50/mt, but liquidity reasonable for 0.5% sulfur with 18,000 mt trading between $506 and $507/mt. The spread between the two markets has widened to $111/mt.