E/W blows out on Singapore weakness, but supply-side tightness on the horizon points to a reversal on the cards
Commentary summary:
– The blowout in the gasoline E/W spread has come as something of a surprise, with supply expected lower as refining margins pressure expected to impact Indian and Chinese refiners most
– Front-month Sg92 has moved into contango for the first time since November, but the E/W moves have opened arb opportunities across the Pacific as well as blocking any further flows from Europe into the EoS
– In Europe, export opportunities to LatAm and WAF remain, but climbing MR rates (TC2) have cut off TA arbs and the EBOB blend margin is closed, keeping a firm lid on EBOB for now
– Mogas/diesel spreads are pointing strongly towards diesel production globally, trimming mogas yields and likely setting up lower inventory builds and a stronger Q2
The reaction to crude availability issues presented by the latest round of sanctions on vessels carrying Russian oil has – somewhat surprisingly – thus far been felt most strongly in the E/W spread, which has blown out beyond $3/bbl in recent days on the back of a sharp downtick in the Sg92 market.
Philip Jones-Lux is Senior Analyst for Sparta. Having worked with organisations such as JBC Energy and RP Global, Philip is a seasoned energy market analyst with expertise across the oil barrel and power markets
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