Euro oil/products: Volatility persists as inflation outweighs forecasts
Quantum Commodity Intelligence – Brent crude futures slumped more than 6% on Tuesday as higher inflation expectations in Europe dovetailed with an expected slowdown in demand from China on the expectation of more Covid restrictions.
Brent crude for September was pegged at $100.29/b at the 430pm London close, down more than $6/b on the day as news emerged that Macau, Xian, home of the terracotta warriors and to an 11 million population, and nine other cities were under some form of partial lockdown.
That is more than offsetting fears of a structural supply shortage and funds appear less than willing to place back the bullish bets they dumped last week.
The dollar remains firm, which is also having a negative impact on futures.
July diesel expired on Tuesday, leaving the front month as August.
Cash diesel cracks on cargoes were broadly stable as was jet, with the market seeing a rare day where spot trades were heard for both distillates delivering into Europe.
Gasoline barges remain thinly traded and as such the all day average assessment premiums over swaps remain volatile.
Products
Naphtha cargoes were bid/offered at $4/mt versus $12/mt over July balmo swaps, with paper cracks rallying more than $2/b as crude tanked. Crackers are coming back from maintenance to increase demand, but outright petrochemical demand remains slow and July manufacturing figures are expected to be bearish.
Gasoline barges were thinly traded with nothing seen on E5. Barge freight is increasing in costs as the summer heatwave dries up the Rhine. On MTBE, the factor continued to decline indicating that higher naphtha cracking is producing more octane to help with gasoline blending economics.
In the jet cargo market two deals were heard, with BP taking Unipec's offer for a Rotterdam cargo delivering July 22-26 at $14/mt over underlying swaps, equivalent to $1,154/mt CIF and Vitol hitting Shell's bid for a Le Havre 25-29 July cargo at $12/mt over underlying swaps, equivalent to $1,156.50/mt CIF. In the barge market offers were seen at $3/mt above swaps for MW, equivalent to $1,145/mt FOB ARA. It went untouched.
Diesel cargoes also traded for the first time in weeks, with Trafigura's bid for a July 26-30 Immingham non-Russian cargo at $81/mt over August LSGO futures being hit by BP at a price equivalent to $1,154.50/mt, around $5/mt below prevailing value. In the Med, nothing was seen. On barges FE was offered at $87/mt above August LSGO and the backend at $68/mt. Quantum assessed at $73.75/mt. In gasoil cargoes, BP was bidding for a July 24-28 Lavera cargo at $80/mt above LSGO August futures while in the north nothing was seen. On barges, 50ppm was bid up by Total at $60/mt above LSGO futures, while nothing was seen on 1,000 ppm.
Fuel oil barges were bid higher by shipper Maersk, albeit for non-Russian material, which sources said was at a $30-40/mt premium over HSFO open origin barges, which were marked at $2/mt under balmo swaps. Marine fuel traded in a range of $427-429/mt, where it was bid on at the close.
