Euro oil/products: Crude bounces back, product cracks rally

Quantum Commodity Intelligence – Brent crude oil futures rebounded away from the psychological level of $100/b on Thursday, but prices remain volatile amid news that US product demand rose to a four-month high.

Front month Brent crude futures rose $5/b to $105.62/b by the London 430pm cash market close, its highest finish since Monday, the day before the brutal sell off that saw over $10/b wiped out in one session.

Russia's deputy foreign minister told Interfax that the western plan to cap oil prices would collapse, while analysts warned it could lead to a curtailment in available supply.

Sentiment that could be attributed to the rise, as well as the feeling the fall was overdone.

The move looked to be led by product demand, with cracks exceeding the percentage gain in Brent.

Gasoline cracks firmed on the day, jumping $5/b, but that only recovered the last two days of losses and cracks are still lingering near six-week lows.

ULSD futures rose nearly $50/mt, with the crack to Brent breaking back above $50/b after dipping below that level for the first time in a month this week.

And jet cargoes kept pace with diesel, with CIF NWE vessels pegged at $1,156/mt, up $50/mt on the day and the crack rose only marginally to $41/b.

Products

Naphtha cargoes landed in Northwest Europe were assessed $21/mt higher at $808.25/mt, following the moves in the underlying swaps but with the crack a touch weaker on the day. There were no physical indications. Dow was offering a propane cargo into Terneuzen for July 17-21 dates at 85% of naphtha July swaps, or $680/mt. Spot propane rose $9/mt on the day to $674.75/mt.

Eurobob gasoline swaps rebounded sharply, supported by the recovery in Brent and as US gasoline stocks fell as exports picked up while refining output was static. RBOB futures were up nearly 7%, taking back 1.5 days' worth of losses, and with the transatlantic spread slightly wider at $7.30/mt. July Eurobob swaps were up $57.75/mt bu the close at $1,128.25/mt, equal to a crack of $33.7/b. Liquidity in ARA picked up with 6,000 mt trading on E5 and 13,000 mt on E10. Barge differentials also picked up with E5's rising to $70/mt by the end of day and E10's to $56/mt. Premium unleaded traded in a range of $1,261-1,265/mt, or a crack of $47/b. MTBE traded twice at $1,682/mt, moving its factor to E5 down to 1.40.

The premium for diesel barges over front-month gasoil futures narrowed to $25.50/mt with zero physical indications. At the same time prompt 50ppm barges were bid up to $5/mt and $7/mt over July LSGO where they traded, with a total 4,000 mt changing hands. Vitol returned to the northwest European diesel cargo market, aggressively offering down an open-origin cargo into Rotterdam. The July 21-25 cargo was offered down to -$50/mt below July 18-24 dates, equivalent to $1,091/mt. At the same time, Trafigura was bidding a July 17-21 diesel cargo into Immingham, excluding Russian origin, at $47/mt over July LSGO and a July 22-26 cargo at $39/mt over the gasoil contract. It means that the differential between Russian/non-Russian origin has widened to over $70/mt. In the Med, Totsa was offering a July 17-21 diesel cargo into Lavera at $73/mt over July gasoil futures, above prevailing value. Diesel differentials slid, with the NWE premium over July LSGO down to $48/mt, while the Med was down to $46.50/mt.

The jet fuel cargo window continued to see liquidity as cargoes were bid higher, moving its differential over LSGO back up to $25/mt. BP bid up a July 18-26 cargo into Le Havre at $11/mt over July 8-29, or $1,162/mt, where it was hit by Vitol. Meanwhile, Shell was looking for a July 17-21 cargo into Antwerp at $7/mt over July 8-20 pricing, or $1,160.75/mt, while it bid a late July cargo into Le Havre at $2/mt and July 17-23 cargo into Haven at -$4/mt to the same pricing dates. On the sell side, Unipec's most competitive offer into Rotterdam was a July 17-21 cargo at $13/mt over July 25-31 pricing, or $1,159/mt, with the same cargo offered at $95/mt over August LSGO. A prompt jet fuel barge traded at $5/mt over the paper, moving barges back to a $2/mt discount versus cargoes.

The fuel oil 3.5% barge market lacked physical indications, with the spot tracking Brent higher to $463/mt, up $27/mt. Marine fuel 0.5% barges for back-end dates trading on the bid at $762/mt, while the mid-window was bid at 762/mt versus offers at $765/mt by the close. The spot was assessed $6.50/mt higher at $764/mt, causing cracks to fall and taking the Hi5 spread down to a two-week low of $301/mt.