Euro oil/products: Diesel slumps, Brent eases and gasoline cracks rise

Quantum Commodity Intelligence - Front line Brent futures slumped back to seven-month lows on Tuesday as demand destruction fears again reared their head and the OPEC+ decision to cut supply was interpreted as a sign of weakness by some analysts.

Brent November futures were pegged at $93.20/b by the cash market close in London at 1630 local time, down $2.36/b on the day and hovering near the lowest levels since early February.

Expectations of state intervention in the gas market calmed nerves in TTF futures, which cascaded into diesel, with the September LSGO futures contract falling almost $60/mt on the day.

Given diesel is the main driver of value in the barrel, or indeed the only driver, big falls in diesel mean big falls in crude.

Month-ahead paper gasoline cracks rebounded from negative territory to positive amid the fall in crude and increased demand for the arb west.

Products

Gasoline prices ticked higher and Eurobob barges firmed against the underlying swap, as markets tightened on higher export demand. A total of 8kt of oxy E5 barges traded $48.50/mt above the October swap at $844/mt, from a $43.50/mt premium on Monday. And 4kt of E10 non-oxy barges firmed $6.50/mt against the swap to $856/mt. Hartree sold a single premium-unleaded barge to Gunvor at $850/mt in the MW, and were marked down $11.50/mt on the day at that level.

Naphtha cracks firmed again as blending demand ticked up on winter gasoline grades, up by around $1/b on the day to -$20.78/b. Shell bid $1/mt below the swap for a 22-26 Sep cargo and Rosneft offered a cargo at the same level. CIF naphtha cargoes were assessed down $11.25/mt on the day at $643/mt, or $0.50/mt above the swap.  

The jet cargo market saw only offers on Tuesday with Glencore and Vitol seeking to sell cargoes into Rotterdam and Le Havre, respectively. Glencore was offering a cargo at $56/mt above September LSGO for delivery around 27 Sep ($1,136.50/mt) and Vitol was much more aggressive at $15/mt over swaps for a 20-24 Sep cargo ($1,111.50/mt). Those were untouched and Monday's $8/mt cash differential to swaps was carried over, leaving a flat price assessment of $1,110/mt CIF NWE. That's $29.50/mt above LSGO, down $6/mt on a day when LSGO tanked. That shows real weakness in jet and the M1/M2 backwardation fell from $43/mt to $36/mt. The barge premium over cargo fell to parity on Tuesday as barge swaps fell more than cargoes and cash bids and offers of $5/mt and $12/mt over swaps failed to test the $7/mt cash differential.

With LSGO falling, the premiums of ULSD cargoes over futures rose only marginally. Swaps fell less than futures and the cash differential of $8/mt was carried forward with bids falling way short of that level. Glencore and Trafigura were bidding for third decade September cargoes into a range of locations. The most competitive was $12/mt above swaps into Pauillac ($1,101/mt). That figure was equivalent to $21/mt over LSGO swaps, not taking into account port differentials. Quantum assessed at $14/mt over. Nothing was seen in the Med and barges traded $4-7/mt above futures.

Gasoil barges were also slow, but there were, for a change, indications in both the north and the Med. Repsol was offering a Le Havre 16-25 Sep cargo at $4/mt above swaps, ($1,048/mt without port differentials). And Vitol was bidding for a 29 Sep cargo into Alexandria at $4/mt under swaps ($1,033/mt). Both were untouched.

Mercuria joined Aramco in the HSFO market, selling a combined 18kt of barges to Trafigura, Peninsula, Vitol and OEI at $398-403/mt. HSFO barges were assessed $5.50/mt lower on the day at $399.50/mt, or $6.50/mt below swaps. Shell and Totsa offloaded 0.5% marine fuel to BP and Peninsula at $648-649/mt, and were assessed at $651/mt, taking into account market structure on the day. Discussions continued in the Mediterranean, with cargoes offered in Barcelona at a $7.25/mt discount to the swap and in Algeciras at $8.50/mt below. HSFO cif cargoes were assessed down $12.75/mt on the day at $369.25, or $8.25/mt below the swap.