European oil prices surge higher on signs of recovering demand

London (Quantum Commodity Intelligence) - The European oil complex rallied to fresh highs Wednesday amid expectations of recovering demand after data showed Eurozone business activity accelerated in April.

But the weekly US oil market report, which at first glance looked bullish, eroded some of the gains towards the end of the day after casting doubts on the trajectory of gasoline.

IHS Markit's final composite Purchasing Managers' Index (PMI), seen as a good gauge of economic health, climbed to 53.8 last month from March's 53.2.

Although the Eurozone vaccine programme was initially hit with problems, it has started to pick up and optimism amongst services firms improved.

The business expectations index climbed to 68.4 from 67.4, its highest in over a decade.

Shipping giant Maersk posted record first quarter profits amid a surge in global demand for freight, and warned there would be bottlenecks in supply chains through the rest of the year as the market struggled to keep up with orders.

Earlier this week, the International Airline Transport Association said global air freight demand hit a record high in March.

July Brent surged overnight, and almost hit $70/b after the release of the weekly US oil statistics from the Energy Information Administration which showed an 8 million barrel draw in crude stocks.

But the crude future retreated later as the market focused on gasoline stocks, up 700,000 barrels over the week to April 30, and the gain in overall product stocks as refineries increased utilization rates 1.1 points to 86.5%.

Production of gasoline in the US also dropped to 9.1 million b/d over the week, down from 9.6 million b/d a week earlier.

The draw in crude stocks was also helped by a drop in crude imports to 5.5 million b/d, down 1.2 million b/d.

By 16.30 UK time, July Brent was trading around $69.67/b, up 94 cts from the same time Tuesday.  

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Naphtha cargo prices rose $9.75/mt ($1.08/b) amid the rally in crude, improving its crack value to -$1.67/b, extending gains to four trading days in a row. Cracks in the nearby swaps curve saw gains of around 10 cts/b. The spread above propane cargoes widened $9.50/mt to $114.25/mt, while the naphtha versus propane balance month paper difference widened to $113.50/mt, and June to $112/mt.

Premium unleaded gasoline barges traded several lots in a narrow range, and the assessment at $677/mt, up $10/mt ($1.20/b) pushed crack values higher, largely to reflect higher crude. There were bigger gains seen in Eurobob E5 and E10 barges but the all-day assessment captured gains when crude prices were higher.

Jet barges in FARAG corrected higher after Tuesday's relatively low value trade. Jet cargoes were again offered at $23/mt above June Low Sulfur Gasoil futures, and the market was assessed 25 cts lower. The flat price gain of $8.25/mt was up $1.04/b from Tuesday.

Distillates futures outpaced Brent, with the balance month Low Sulfur Gasoil value, combing May and June futures, up $8/mt ($1.08/b) from Tuesday. Diesel barge differentials slipped back to trade 50 cts/b below May Low Sulfur Gasoil futures.

High sulfur fuel oil barges edged only $3.50/mt (55cts/b) higher. The balance month May swap was up $5.50/mt to keep its crack value versus Brent steady, maintaining the slide seen Tuesday. Singapore cracks for nearby HSFO 380 cts paper slide lower earlier in the day.