Europe oil/products: Light ends slump more than Brent
Quantum Commodity Intelligence - European oil prices crashed lower as the United Arab Emirates leaked a story to the Wall Street Journal about its determination to boost production, but there was a sharper fall in gasoline prices ahead of the US weekly oil inventory report Thursday.
September Brent was down $1.74/b by the 1630 London time marker compared to Tuesday, trading at $72.99/b.
Backwardation eased at the front of the curve with October Brent down $1.68, and November down $1.63/b.
Low Sulfur Gasoil futures in July were down a combined $1.68/b, or around $12. 50 to 12.75/mt lower.
But the light ends were under pressure, with cracks falling sharply against tumbling Brent.
Products
Propane cargoes in north Europe saw the biggest falls of $25.75/mt, some $7/mt more than naphtha cargoes. But the picture was reversed in barrels, with the lighter propane gas falling $2.03/b and the liquid naphtha falling $2.11/b. Both products saw crack values deteriorate versus a lower Brent. Spot naphtha cracks are slightly positive. The market is watching propane stocks closely in the US and whether they will build quickly enough ahead of winter.
Backwardation eased in the gasoline market amid the slide in crude, with Eurobob E5 barges started the day trading $4/mt above August paper, and ending trading at $3/t above. That is down from $7/mt on Monday. The move for E10 barges was more extreme, as they fell from premiums of $7/mt down to $3/mt. Premium unleaded barges traded at $702/mt, down $19/mt ($2.28/b), while E10 barges were down $18.75/mt ($2.25/b) and E5 barges down $19.75/mt ($2.37/b).
The nearby contango in jet narrowed, with spot cargoes in the north dropping $9.75/mt ($1.23/b). But August and September paper dropped $12.25/mt and $12.50/mt respectively, or $1.55/b and $1.58/b.
Low Sulfur Gasoil futures followed the fall in Brent. The distillate futures curve remains in mild contango until it flips into backwardation in October. Diesel barges are trading at slender discounts to July LSG ahead of its expiry next week. There is strong demand for gasoil, which likely reflects the pull for blending into the marine fuel (0.5% sulfur) market.
The slide for futures triggered trade in the fuel oil barge market in ARA with 24,000 mt changing hands in high sulfur and 26,000 mt in marine fuel (0.5% sulfur). Both markets are backwardated, but while high sulfur traded in a narrow $1/mt, marine 0.5% fuel traded within a $4/mt range.