Market pricing critical levels as underlying support beginning to fade

Commentary summary:

• Sg92 spreads had been heading lower before the US sanctions on Lukoil/Rosneft set markets alight once more. Since last Wednesday, Nov/Dec spreads have gained $1/bbl, with values rising also down the curve 

• In Europe, the return of the Dangote RFCC has yet to stem the flow of gasoline cargoes from Europe heading south. Nov/Dec spreads are heading into pricing at $28/mt, challenging the highs from 2021/22. I’m reminded that my mildly bearish call at the beginning of October was tempered by the fact that Nov/Dec spreads almost always appreciate through October, and this year has been no exception.  

• TC14 strength (and TC2 weakness) is yet to diminish the attractiveness of USGC-origin arbs into the Atlantic Basin. Components in Houston are simply much more competitive than those in ARA currently, although we would expect those component diffs to come off sharply now in ARA with blend margins and arb opportunities both closed currently.  

• Looking ahead, European naphtha is in a difficult place with poor gasoline blending econs, very cheap petchems, and cheap LPG available. As such, the return of 2022/23 levels of gas-nap through from here and well into Q1 are perhaps unsurprising. However, with arbs out of Europe open into the East and into NYH and some seasonal downside expected eventually for gasoline, the risk on gas-nap now looks like it is skewed to the downside.  

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

Sparta is a live, market intelligence and forecasting platform that enables oil traders, refiners, banks, hedge funds and wholesalers to have access to real-time and global actionable insights to capture market opportunities before others.

To find out how Sparta can allow you to make smarter trading decisions, faster, contact us for a demonstration at sales@spartacommodites.com