Signal Brief: Iran Update Part 1 – 6th Mar, 1200 CET

Crude Signal Brief: Iran Update Part 1 – 6th Mar, 1200 CET

• Paper Brent is incrementally pricing the enormity of the current challenge.

• Physical WoS crude is ripping in some parts, while still sluggish in others. The Americas is gaining a lot of ground; particularly Guyanan, and USG sours. 

• WTI’s FOB premium to MEH on the USG is now an unusual +$3/bbl. Extreme structure in freight & WTI/Brent paper will be playing havoc, as will expectations of future US SPR release which may also be keeping the MEH spread itself large.

• Of course, the logical step now is that WTI demand particularly from Asia starts to soar. Interestingly, WTI doesn’t actually clear to Europe against Forties (landing at big premiums in NWE) just now and is now also landing roughly on par with Agbami and Forties into Far East (well, a few $/bbl give or take); yes Asians are cutting, there are huge m-o-m changes to crude procurement/demand currently unravelling, and there are concerns about un-hedged margins collapsing etc; but perhaps once WTI gets too pricey in Asia, WAF/North Sea is naturally next to see a least some movement. WAF travel times are also shorter.

• Part may also be down to some typical WAF buyers being India and China who are busy either cutting back runs, upping Russian imports, drawing on floating barrels & looking to draw on their own SPR (which will highly likely be cheaper/safer than arbing WoS). That plus more ex-Yanbu Arab Light; that could be as much as 3 MBD of incremental crude supply depending on effective Yanbu load capacity and assuming the infrastructure stays intact/tankers are not harassed in the Red Sea.

• Beyond those “relative minutiae” let’s add to the mix the generally increasing likelihood (despite press releases) of large SPR releases in West and East, for crude and products, and news that some Asian authorities will hoard their own product volumes instead of exporting, and even ration consumer demand. This is active demand destruction at work already, and perhaps in times like these it is – unfortunately – naturally the smaller importing developing nations who could end up rationing the most (exactly where it is also harder to measure).

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