Europe oil/products: Brent crashes to $69/b, Eurobob sees biggest fall

Quantum Commodity Intelligence - Brent slumped to a seven-week low to trade close to $69/b amid a risk-off day in global markets, with twin concerns present over the spread of Covid in south-east Asia and the rising threat of inflation.

September Brent tumbled to $69.11/b by the late afternoon marker, down $4.54/b from the same time Friday, the largest one day fall in over a year.

Backwardation between September and November tightened $0.17/b amid the crash in prices, although there was still $1.11/b between the two crude futures.

Distillate futures slightly outpaced Brent, with August and September Low Sulfur Gasoil futures both down $35/mt ($4.70/b) by 1630 London time.

But gasoline fared worse than middle distillates amid the sell-off, while fuel oil and propane were the most resilient to the crude crash and saw margins rally.  

Meanwhile, the Rhine opened to barge traffic from ARA up to Mannheim-Rheinau, according to the waterways authority WSA Rhein, and water levels will continue to drop through the week.

Products

Naphtha cargoes in north Europe saw heavy losses, down $39.25/mt ($4.41//b), while the August spread to Japan widened sharply, gaining $6.75/mt to $14.50/mt, according to broker data.

Propane was highly volatile with several changing spread relationships. Flat prices for cargoes into northwest Europe fell only $29.50/mt ($2.32/b). The August cargo paper spread to naphtha gained $10.25/mt, the August arbitrage spread above Mt Belvieu narrowed $4/mt, and the far east index also saw volatility, with propane in Japan gaining $12.75/mt above naphtha cargoes at the time of the Europe close.

Eurobob gasoline barges tumbled. The market started trading the day at $4/mt above August paper and ended at $6/mt above, but the 1630 London time price was $44.50/mt ($5.43/b) lower. The arbitrage for both Eurobob and premium unleaded to RBOB gasoline narrowed, with the US August and September paper dropping the equivalent of $47.25/mt and $45.75/mt.

Backwardation also narrowed in the Eurobob curve amid the slide, with August paper down $43.75/mt and December paper down $38.50/mt. The nearby structure was still wide with $17.50/mt between August and September paper, narrower by only around $1.75/mt. Backwardation between the same months was wider in the nearby premium unleaded gasoline curve in the Mediterranean, at $20.50/mt today, despite narrowing $3/mt.

Jet cargoes into northwest Europe were both bid and offered at $25/mt above August LSGO, although the orders were for different ports of Rotterdam and Le Havre and slightly different loading dates. The nearby curve remained in very mild contango. Flat prices dropped $35.75/mt ($4.53/b).

Diesel barge trade remained very thin despite the $35/mt $4.69/b) drop in flat prices. Just one trade was seen at $2.50/mt below August LSGO, loading back-end dates, while middle window dates were bid -$2.50/mt and front end was offered at -$2/mt. A 50ppm barge traded at -$5/mt below August LSGO futures.

In the diesel cargo market, the bid into Amsterdam improved to $4/mt above August LSGO, and in the Mediterranean, there was an offer into Lavre at $6/mt above August LSGO.

With recent consecutive low LSGO future expiries and a mild contango, trade has been lacklustre. Expect barge congestion on the Rhine when the river full reopens, brokers said.

The spread between marine fuel (0.5%) and high sulfur fuel oil crunched lower amid the crude slide, with 0.5% down $33.25/mt and high sulfur fuel oil barges down $24/mt. But the spread still remained high at $113.75/mt, as well as widening further along the curve to $118.75/mt in December.