Bullish price action in July across the barrel with flat price and product cracks marching upwards

15.08.2023 By Stanislav Ermilov

We wrote last month about the disconnect between crude flat price and the stellar performance in clean product cracks. This month crude responded to the strength and the ongoing chatter of accelerated Chinese crude stockpiling, with Brent rallying $10/bbl up to $84/bbl.

While crude rallied, gasoline and diesel markets soared higher to make new year to date highs. Gasoline remains the best performing part of the barrel, with the August Ebob Crack jumping by $10/bbl to trade above $30/bbl.

Distillate spreads and cracks have also spiked, led by Eastern strength. All in all this is keeping margins at very attractive levels for refiners as we enter the heart of 3Q.

Macro bears will continue to beat the drum, but product strength and the recent IMF global growth forecast upgrade to 3.0% from 2.8% should make them think twice in terms of the balance of year expectations for global oil demand. Perhaps further oil flat price appreciation is required to put the brakes on demand.

Light Ends

Gasoline markets remain very very strong. Aug/Sep EBOB is trading +45/mt and Aug/Sep 92R spreads are over $3/bbl backward. The strength is relentless. Naphtha remains dislocated and weak but July saw cracks begin to rebound from the year-to-date lows and there seems to be some support in timespreads at around -$2/mt in the front months.

August EBOB Crack

Distillates

Keen observers of the price action in distillate differentials through month of June will have seen the signs of strength that have since translated into soaring timespreads and cracks across the price centres.

The resurgence in distillate values seems to have been Eastern led, with August East/West ticking up from -$16/mt to -$10/mt this month before the ICE GO screen took off to make ARA the strongest price centre.

As has been the theme for a long time, global distillate stocks are running at record lows so it is inevitable that the biggest import hub, North-West Europe, will have to intermittently jump in value to attract re-supply.

Distillate remains a very difficult market to short, particularly with hurricane season around the corner and Europe looking to build some stocks before a winter without Russian barrels.

Aug/Sep Sing GO

August GO East/West

Fuel Oil

Not wanting to be left out, fuel cracks also performed in July with 3.5% FO Crack rallying $3/bbl up to -$6/bbl over the last couple of weeks.

BACK TO NEWS

Related
News

Volatility dampens amidst the Distillate-led slump in oil values

Overview The oil market has been uncharacteristically subdued this month. Flat-price Brent has slipped back to lows within the $80 to $90 range it’s been trapped in since the start of the year. Taking their cue from Distillates, Crude spreads have run out of steam, with values sinking into mild backwardation at $0.30 to $0.40 […]

Middle Distillates’ downward move should not be overlooked amidst a jumpy flat-price environment

All eyes will be on Gasoline performance as we enter Q2. While Crude has been more sensitive to Distillates’ waxing and waning in recent years, this year Gasoline seems to be the fraction of the barrel with the most riding on it. Question marks remain over global oil demand growth this year so US Gasoline demand this summer will be a metric high up on traders’ lists of items to track.

All eyes on gasoline as traders look to pin their hopes on Light Ends to defy the demand bears

Red Sea-fuelled Distillates buying spree winds down amidst emergent strength in Crude spreads

As oil markets settle into the new normal of reduced transit through the Red Sea, price action has become less erratic. TC5 has not made new highs, European Jet Fuel (a market hugely dependent on Asian re-supply) has come down dramatically and Gasoil cracks have been on the decline. Crude spreads have rallied significantly, but […]

Imbalance not shortage: Red Sea tensions create re-supply uncertainty in arb dependent product markets

Bar Friday night’s spike, crude has enjoyed an uncharacteristically sedate ascent since the turn of the year. Brent is heading into the mid $80s, and WTI firmly in the high $70s. Despite the barrage of geopolitical risk headlines in the market, flat price has not been a runaway train. While product diffs have been hyper-sensitive […]

Geopolitical risks play second fiddle to an oil market trying to re-price back to fundamentals

Overview Last month we noted the post-summer implosion of US gasoline markets and the risks it posed for the oil complex. This eventually manifested in a spectacular decline in WTI, as refiners shunning crude in the mid-continent translated to faster-than-forecast US crude builds. Brent was not spared – as may have been the case in […]

Clean product markets stutter as geopolitical price boost veils true oil market fundamentals

In moments like this, OTC markets provide a clearer view of oil fundamentals than flat price, which often gets muddled by the noise of speculative fast money. Crude oil started the month on a softer tone, with Brent flat price steadily drifting down into the mid-to-low $80s, from the heady heights of the mid $90s […]

Crude rallies $10/bbl as the rapid grab for physical barrels forces WTI and Brent shorts to fall on their swords

We wrote last month about clean products being far too strong for crude to sit idly by. This did not take too long to correct, with Oct WTI rallying from $80/bbl up to intraday highs over $93/bbl in just three weeks, dragging Brent up with it into the mid 90s. Crude spreads have also done their bit to dampen the clean product cracks down from extreme levels.

Clean product cracks pushing margins back to year-high levels, leaving refiners poised to bid up crude oil

The first half of August saw strength across the entire oil complex. Brent made a push up
towards $90/bbl before easing in tandem with the recent weakness across global equities
(October Brent futures currently trading $83.98/bbl).

Crude in tug of war with gasoline and distillates: June bid/offer and liquidity levels for main market movers

Flat price crude faced significant pressure in June with WTI and Brent struggling to stay above $70/bbl and $75/bbl respectively. The underwhelming performance in flat price is in line with a bearish macro picture and a weak crude physical market, reflected in continually suppressed DFLs and talk of plentiful physical offers in the Singapore MOC. […]

May intraday bid/offer and liquidity levels for main market movers

Stay ahead of the market with Tallarium’s insights and discover the dynamics of the oil market.

How gasoline traders can leverage automation to gain a competitive advantage

Gasoline markets are some of the most unpredictable and complex in the commodity space. This creates both challenges and opportunities for gasoline traders.

McKinsey believes digitisation can provide a competitive edge in metals, but we think the impact will be even bigger for OTC energy

McKinsey believes digitisation can provide a competitive edge in metals, but we think the impact will be even bigger for OTC energy.

What is one of the biggest challenges OTC energy traders encounter every day?

Across the more than 200 traders we engaged with, we saw one consistent challenge emerging time and time again. Read on to find out what.