Europe oil/products: Crude rebounds and distillates shake off EIA stock gain

Quantum Commodity Intelligence – Crude oil futures in afternoon London trade Thursday recovered earlier losses after the EIA posted a big crude draw for the seventh successive week despite crude production rising 500,000 bpd in the past three weeks.

Front-month September Brent futures were trading at $73.67/barrel at the 1630 London close, compared to Wednesday's settle of $73.43/b after falling briefly to $72.16/b earlier in the day.

At the same time, August WTI was trading $72.44/b, up from Wednesday's settle of $72.20/b.

Distillate futures rebounded tracking crude in the afternoon and cracks also made gains on the day, contrary to recent sessions where products have generally lagged behind and despite a 1.6 million barrel stock build in the US.

The front two months July and August both gained $6.50/mt on the day to $585.75/mt, $587/mt respectively, while cracks strengthened around $0.2/b.

Products

Propane continued its reverse, with the spot value versus naphtha collapsing $16.50/mt to -$37.50/mt, while August and September swaps dropped $18.75-$22.50/mt versus naphtha and the Q4 value fell $14/mt. EIA data showed propane stocks gained 492k barrels on the week. Naphtha physical rose $9.50/mt, the August swap by $9.25/mt and cracks between $0.3-$0.4/b in the nearby curve.

Eurobob gasoline rode the double wave of support from rising crude and a larger than expected stock draw in the US and the backward structure steepened again, with trades heard throughout the day at $5/mt over August swaps up from $3/mt the prior day. Premium unleaded product saw a less pronounced $9/mt flat price move, compared to $11.75/mt for E5 barges.

Jet in Europe saw margins increase, with premiums over distillate futures rising for all markets except spot-delivery NWE cargoes where an offer at $23.50/mt into Rotterdam capped gains. Cracks rose $0.28/b for August. 

Diesel barges changed hands six times at prices between $0.75/mt and $1.25/mt below the soon to expire July LSGO contract. Further out loading barges were valued higher and the contango into August was $0.25/mt wider on the day. ULSD NWE cargoes were in a wide market of $3.25/mt against $5/mt. Flat prices and cracks ended up moving largely in lockstep with the rises for futures.

High sulfur fuel oil barges were assessed $5.50/mt higher tracking, while marine fuels benefited from buoyant distillates to make a similar gain.