Europe oil/products: Gasoline cracks jump after draw in US stocks
London (Quantum Commodity Intelligence) - With US crude stocks shrinking at an alarming rate, down another 7.6 million barrels last week to add to the 7.3 million draw a week earlier, Brent hit highs last seen in 2018 on Wednesday.
Several chief executives have now chimed in with the warnings of $100/b oil in the future after the investment gap, although the bulls have their sights fixed on $80/b this summer, which will still help cash flows coming out of the pandemic.
Upstream oil companies are set to record 13-year high free cash flows this year of $348 billion, as oil prices rise, investment stagnates and shale producers turn profitable, said a report from energy consultancy Rystad Energy Wednesday.
But the US inventory statistics provoked a divergence in European prices with light ends, buoyed by the 2.9-million-barrel draw in US gasoline stocks, seeing double digit gains in metric ton prices, while distillates in Europe, after US stocks gained 1.8 million barrels, saw single digit rises.
By 1630 UK time, August Brent was trading at $75.70/b, up $0.95 from Tuesday.
Naphtha cargo prices in north Europe gained $16.25/mt ($1.79/b) and the backwardation widened to July to $10.50/mt. The spread between July and August paper also widened to $9.50/mt. The July spread to Japan narrowed again to $10.75/mt, brokers said.
Eurobob E5 barges traded flat to July paper in the morning, and than at a premium of $2/mt in the afternoon. Trade was brisk with 18,000 mt changing hands. The E10 market traded 8,000 mt at $2/mt above July E5 paper. Premium unleaded barges traded at $712/mt and $713/mt. The crack for Eurobob jumped $0.61/b, and there were similar gains in July and August.
Jet prices in north Europe almost followed the gain in Brent. A cargo traded into Le Havre at $21/mt above July LSG, but spot cracks have softened recently. Cargo trade in the Mediterranean remains very thin, sources said, and demand is filled out of storage barrels, often commanding a premium to the CIF cargo market in the north.
Diesel barges failed to trade in ARA for the second day in a row to mark the lack of demand still. The previous expiry of front month LSD Gasoil was the lowest since records began. Cargo premiums remain low in the north amid the contango, with bids into Amsterdam at $3/mt and offers at $3.50/mt above July LSG.
The fuel oil market continued to trade in very narrow range, with high sulfur barges changing hands between $515.50 and $517/mt, and 0.5% sulfur trading between $403 and $404/mt. Both the nearby curves in both markets were in slight backwardation.