Negative EFS emerges, but Brent pressure still likely

Commentary summary:

• The May EFS is negative. Forties and Saharan crudes are landing closer to Murban prices, but North Sea/Med/WAF light sweets are not yet open to the East, also on a margin basis.

• WTI landed values in NWE have lost competitiveness against Forties due to corrections in CFD backwardation and WTI/Brent paper widening. But WTI Afras remain cheap enough.

• Weak Asian demand for WTI due to TARs, poorer margins, Chinese tariffs, and Exxon’s Singapore resid upgrader start-up mean WTI might still end up clearing in part into Europe.

• Brent/Dubai and FOB premia in Europe need to adjust to move tonnage. There is probably less urgency on the medium crude side with extra demand emerging from e.g. Tupras, Orlen.

Flat price has risen to a 3-week high and more optimism seems to be seeping into the market with geopolitical risk, OPEC compensation cut chatter, and some bullish indications arising on China.