Euro oil/products: Crude rebound crushes European cracks

Quantum Commodity Intelligence - Crude prices surged on Tuesday as the market continued to unwind the impact of Monday's dismissed reports OPEC would raise output, with European product cracks hit hard as OPEC members piled on to quash the supply rumours.

Front-month Brent futures were up 2.2% from Monday's settle at $89.25/b, although that did not tell the whole story of the previous session, with Brent up over $6/b from Monday's London 430pm close.

Prices slipped to $83/b for the first time since early January at the London cash market yesterday before rapidly recovering after the European print.

Prices continued to rebound in the crude oil market as a succession of OPEC members issued public statements to backup Monday's announcements from Saudi Arabia and the UAE that there were no plans afoot to lift output.

In the products market, ICE Low Sulphur Gasoil Futures for December were up 3.4% from Monday's settle at $947.50/mt.

Following its Monday report that sent the crude oil market into a spin, the WSJ said Tuesday that G7 members were toying with a Russian crude oil price cap of $60/b that could be announced as early as Wednesday.

Products

Naphtha cargoes were bid at flat and offered at $4/mt over December swaps, keeping the market structure unchanged. Quantum assessed at $672/mt, up $32.50/mt on the day. The crack versus Brent fell like other products.

Gasoline firmed against swaps on Tuesday as liquidity slipped from recent highs. Totsa and Trafigura unloaded a total of 6kt of oxy E5 barges to Shell at $22/mt over swaps, from an average $15.75/mt premium on Monday. Totsa also sold non-oxy E10 gasoline with Sahara, to Varo and BP at a $39/mt premium to swaps, from $30/mt above the paper the previous day.

Jet cargoes only showed bids in the Platts window on Tuesday, but buying interest from BP and Aramco failed to test Monday's prevailing value of $107/mt over LSGO. The best bid was from BP at $41/mt above swaps. Swaps firmed against LSGO, leaving the assessment at $1,060/mt, up $35/mt on the day as physical jet tracked crude oil better than LSGO. Refining margins were down slightly. In barges, there was a similar picture with only uncompetitive bids.

In the ULSD market, the most liquid was barges again, which saw a trade with Vitol hitting Glencore's offer of $20/mt above LSGO. That kept the day-on-day rise to just $26.25/mt, when crude rose closer to double that in metric tonne terms from Monday's London 430pm timestamp. The crack saw another fall of $2-$3/b to a near two-week low. In the cargoes, there was nothing seen in the North or the Med, but swaps gained $30-35/mt on the day, leaving cracks again depressed. Nothing was heard in gasoil barges, but two offers – one in the north and one in the Med – pressured higher sulfur values. Repsol was offering a cargo into Le Havre at $1.50/mt under swaps ($915/mt), while an offer was seen into Algeciras at $46/mt lower. That kept the day-on-day rise to a more modest $20/mt in the north to $915/mt and up $6/mt in the Med, also to $915/mt.

Marine fuel 0.5% barges traded along the curve during the Platts window and recovered much of the previous session's losses as crude rebounded, with the front-end booked at $554/mt, the mid-window at $553/mt, and the back-end at $551/mt. With value taken as the average of those deals, Quantum's assessment surged $46/mt day-on-day, bucking a six-session losing streak and recovering from an 11-month low to touch $552.75/mt.

In the 3.5% fuel oil barge market, at least two deals were booked during the Platts window as front-end barges changed hands at $359/mt FOB ARA. With no other deals in a flat physical market structure, those trades were taken as value. Having slipped to a 19-month low during Monday's session as crude collapsed, prices recovered during Tuesday's European window and posted a $17.25/mt gain to touch $359/mt.