The race for medium sour barrels
Commentary summary:
– Frenzied AG market caused huge rally on sour spot premiums, but upside still possible if sanctions are enforced and volumetric effects prove sizeable
– Light crudes like WTI are not a 1:1 replacement for loss of sanctioned barrels
– Narrowing of sweet-sour and light-heavy diffs is expected to persist due to refineries needing to keep their secondary units running
– Ceasefire between Hamas and Israel and Trump coming into office may see downside risks on flatprice
The action was focused squarely on the AG market in the past week, as impact of sanctions dovetailed with the peak trading window for AG crudes which was already expected to be shorter with the end-month Lunar New Year holidays.
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