Euro oil/products: Brent lower on Fed expectations, gasoil rebounds

Quantum Commodity Intelligence - Brent crude futures were trading around the $90/b mark again Tuesday, as markets braced for an expected US Fed rate rise this week that could be as high as 1%, while middle-distillates rebounded after last week's sharp sell-off.

ICE Brent crude was down $2.03/b from the close on 16 September to $90.34/bl by London 16:30 Tuesday.

Expectations the US Federal Reserve could hike interest rates as much as 1% in Wednesday's meeting pushed investors into the dollar and away from commodities.

The Bank of England is also due to meet this week, with many central banks grappling with soaring inflation and the increased risk of recession by tightening monetary policy too quickly.

Middle-distillate cracks moved the other way as prices recovered from last week's sharp correction.

ICE gasoil was up over $5/b against Brent on Tuesday, having lost nearly $20/b last week on the expectation of more supply from China in the fourth quarter.

But bearish sentiment eased on Tuesday as details of China's export quota are yet to reach the market.

Products

Gasoline barge liquidity ticked up, with E10 cash prices moving back above E5. A total of 11kt of oxy E5 barges traded $41/mt above the swap at an average $827/mt, down $8/mt on the day. And 10kt of E10 barges changed hands at a $38.25/mt premium to the October swap at an average $832.25/mt, up $13.75/mt from 16 September. An E10 barge trade was excluded from the day's assessment as it was deemed outside of representative value because of location. And 7kt of premium-unleaded barges traded in a range of $831/mt at the front-end and $793/mt at the back of the curve, and were assessed at an average $809.75/mt, down $34.50/mt on the day.  

Naphtha fell $1.15/b against crude to a -$20.45/b crack. Cargoes in northwest Europe tracked the paper down $10.25/mt on the day to $614.25/mt, assessed at a $10.75/mt discount to the October swap.

A prompt diesel barge traded at $23/mt over the October low sulfur gasoil futures, as 2,100 mt changed hands between Unipec and Mabanaft, with remaining buying interesting standing at $20/mt over. The differential was assessed at $20.50/mt over, down $1.50/mt, and reflecting the backwardation and moves in the swap market. The same accounted for 50ppm where a prompt barge changed hands at $21/mt over gasoil, with the differential assessed lower at $17.50/mt, reflecting the structure. Mabanaft was again the buyer, with Gunvor selling, as 1,100 mt traded. Activity in the diesel cargo market also picked up with two 27,000 mt cargoes changing hands in Le Havre, as Totsa bought twice from Glencore at $34/mt over October gasoil for Sept 30-Oct4 cargoes. The assessed differential also eased to $25.25/mt, taking into account structure and port diffs, with the crack firming. Totsa was offering early October cargoes in Dunkirk at $5/mt over the paper, or $989/mt, and in Rostock at $28/mt over October. The Med saw high offers in Lavera from Glencore at $33/mt over October, while Malta was bid at $15/mt over the paper, or $1,000.50/mt.

Vitol sold a 1,000ppm gasoil cargo for Oct 3-7 dates to Trafigura at $3.50/mt over the paper, or $959.75/mt, with Trafigura buying a second one from Rosneft for similar dates at the equivalent of $960.50/mt.

The premium of jet fuel cargoes landed into Northwest Europe over low sulfur gasoil futures jumped $7.50/mt on the day to $38.50/mt, snapping two days of losses and boosting the crack $6/b to $38.6/b. The backwardation jumped, as October swaps rose $31/mt, while November gained $23/mt. BP was bidding Le Havre for early October dates at $42.50/mt over October gasoil futures, or $1,015.75/mt, while Unipec was bidding Rotterdam for similar dates at $5/mt over the paper, ot $1,007.75/mt. At the same time, Glencore was offering an Oct 7-11 cargo at $51/mt over October gasoil or $24/mt over the paper, equivalent to $1,017.25/mt. There was a single offer for a jet barge at $12/mt over the paper, with the premium for barges over cargoes widening to $6.75/mt.

Fuel oil cracks diverged as HSFO cash markets were pressured again by heavy selling, while VLSFO was steady at around flat to Brent. Aramco was offloading HSFO barges again, selling 14kt at $380-383/mt, and were marked down $17/mt on the day at $381/mt. And Totsa sold 10kt of 0.5% marine fuel at $607.50-610/mt, but were deemed too low against the curve and instead marked at $618.25/mt, down $12.75/mt on the day.