The East calls, Europe answers, European cargoes finally point to Asia for July

Commentary summary:

• Skikda barrels are shifting back to Asia after a month targeting NWE. US cargoes point to stay in NY after a week showing better economics into the East

• Naphtha cracks slump as geopolitical risks fuel crude rally.

• Timespreads remain mixed: prompt values corrected further, but Q3 is showing signs of stabilization for both MOPJ and NWE.

• Strengthening East-bound arbitrage could support Q3 European timespreads, backed by healthy demand from Asian steam crackers.

Naphtha cracks weakened down the curve as Brent climbed to a two-week high amid renewed geopolitical tensions between the US and Iran, Ukraine and Russia, and the impact on supply from the Alberta wildfires earlier in the week, offsetting the expected production increase from the latest OPEC meeting.

This drop of more than $1/bbl in cracks across Europe and Asia has exacerbated the bearish trend that has been building since early May.

Jorge Molinero is a Commodity Owner at Sparta. Starting his career as a financial analyst with BBVA, Jorge quickly transitioned to market intelligence within the energy sector, spending 4 years as a naphtha analyst with Repsol before joining Sparta in early 2023.

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