E/W looks like a buy, gas-nap already well supported

Commentary summary:

• Prompt cracks and spreads look to have recovered slightly but upside is probably limited from here.

• Forward gas-nap has taken a move higher recently, with further upside also likely limited by our more bearish outlook for early-Q2 gasoline. Weaker naphtha fundamentals can help gas-nap widen, but the risk of escalation in Iran makes this a tricky call.

• Although the contango in Europe has narrowed slightly, it still remains workable summer versus summer, carrying through March to April. This, in combination with some workable ARB opportunities still into Latin America, should provide a floor for prompt EBOB from here.

• In the East the combination of; returning Indonesian buying, extended outage at the Pengerang RFCC, impending turnarounds in Korea and across the region, as well as workable ARB opportunities thanks to the very wide E/W, make the SING92 complex a definite buy from here

• By extension of the ongoing potential downside to forward European gasoline and some supportive factors for the East, the Q2 E/W at -6.20/bbl looks like a buy from here

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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