European light ends and fuel cracks tumble, distillates continue recovery
London (Quantum Commodity Intelligence) - European light ends and fuel oil front-month refining margins fell by between $0.67/b and $1.55/b this week, representing a double-digit drop in percentage terms for some products, amid a restart of the stricken Colonial pipeline in the US and bearish sentiment on fresh Covid restrictions in Asia.
Crack values for Eurobob E5 gasoline were already heading lower when the Colonial pipeline shut down and a wave of westward-bound cargo bookings was not enough to stave off further falls, while the June/July structure also flipped into contango from backwardation, according to Quantum data.
The June Eurobob FOB AR crack was $9.71/b at Friday's close, down $1.41/b on the week and $0.56/b on the day, while July was $9.96/b, $1.05/b lower on the week and $0.36/b on the day.
The backwardated structure for June and July Naphtha CIF NWE cracks narrowed, with the swaps falling $0.67/b and $0.5/b to -$3.12/b and -$3.2/b respectively.
High sulfur fuel oil margins also remained on a downward trajectory, even though ARA stocks data showed an 11% fall in fuel inventories last week.
June/July swaps for HSFO 380 CST FOB ARA barges dropped $1.55/b and $1.29/b on the week and $0.74/b and $0.62/b on the day, to -$11/b and -$10.64/b respectively.
Meanwhile, distillate cracks put in a strong showing as they continued their recovery on expectations of renewed diesel and jet demand with passenger numbers increasing on both sides of the Atlantic and European countries tentatively easing travel restrictions.
Distillates have also seen support from east of Suez where curtailed Indian exports have depleted stock expectations in the Singapore regional hub.
Low sulfur gasoil futures led the charge this week for distillates, outpacing gains on Brent crude, but differentials for product swaps versus underlying futures were little changed.
As such, cracks for diesel and jet swaps increased roughly in line with LSGO futures.
Ultra-low-sulfur diesel barges FOB ARA June and July cracks gained $0.41/b and $0.4/b on the week and $0.18/b and $0.22/b on the day to close at $6.63/b and $7.19/b respectively Friday.
Cargoes of jet fuel CIF NWE cracks rose $0.29/b and $0.27/b for June and July swaps to $4.56/b and $5.28/b. This represented minor day-on-day positive moves of $0.03/b and $0.1b Friday.