Europe oil/products: Europe product complex rallies as Brent tops $73/b
London (Quantum Commodity Intelligence) – Crude oil futures burst through the $73/b mark Monday, maintaining momentum, but European gasoline cracks softened across the curve.
The closely watched Brent/WTI spread also narrowed and briefly touched $2.00/b, the narrowest spread since November 2020, according to exchange data.
Front-month August Brent traded as high as $73.62/b in the morning, the highest level since April 2019, before losing ground ahead of the US open and then bouncing around between $73.1/b and $73.5/b.
August Brent was traded around $73.26/b at 16.30 London time, up from Friday’s settle of $72.69/b.
Comparing like-for-like months, August Brent and WTI were $2.17/b apart at the London close.
Low-sulfur gasoil futures moved higher roughly in line with the underlying Brent curve although further out months saw small crack gains due to the increase in backwardation on crude.
Naphtha physical remained assessed at an $11.25/mt premium to the front-month July swap, but cracks retreated slightly for the first 6 months of the curve, with small flat price gains outpaced by stronger crude. Further out months made margin gains with the sentiment on naphtha stronger and crude rising less as its backwardated structure extended.
Spot gasoline prices in Europe rose against front-month swaps, narrowing the physical discount to paper $0.75/mt to $2.25/mt for E5 FOB AR. Prompt E5 barges were heard trading between $679.50/mt and $680.75/mt, or a $3/mt discount to July paper through the day, but after swaps tracked falling Brent lower, $679/mt for physical was heard bid on without attracting sellers at the 16.30 London close. Cracks were lower all along the curve due to stronger underlying Brent prices. The July east-west spread, reflecting the difference of RBOB in the New York above Eurobob E5 in ARA, fell to $24/mt.
Jet CIF NWE cracks weakened very slightly at the front Monday but saw increases starting from August onwards, as the market continues to price in prospective air passenger increases. Cargoes were heard bid and offered at $19/mt and $20/mt respectively over July LSGO, while barges were heard traded at a $1/mt premium to the underlying swap curve for nearby loading dates. FOB Med gained $0.5/mt versus the north but cracks for the southern region remained around $2/b weaker.
Diesel barges were heard trading at a differential of -$2/mt versus July LSGO, but a rise in the underlying futures was enough to drag flat prices and cracks upwards. CIF NWE cargoes were heard at in a market of +$2/mt versus +$2.25/mt lead to a small increase in differential. No gasoil trades were heard but diffs vs LSGO were assessed unchanged, leaving physical prices up $4.75/mt tracking the future.
Fuel oil prices made healthy gains in the nearby, leading to an increase in crack values, but further out months were less buoyant and margins were flat. Low-sulfur product was heard traded at $503/mt for a total of 6kt, an unchanged on the day discount of $91.25/mt versus July LSGO.