Weak European market is now pricing crude to leave the region

21 October 2024 Time to read:  minutes

Commentary summary: 

  • WTI now priced out of Europe where a glut of light sweet has emerged.
  • The weakening in physical Brent (CFDs) and freefall in Med premia should see some light sweets clear to Asia (expect pressure there).
  • The combination of Med clearing and marginal WTI pricing out of Europe sets up a rebound in physical premia, at least for a short while.

Flat price continues to weaken while the physical crude market, in particular Europe, remains on a downward spiral. In Europe, the Med/Black Sea is in free-fall with Es Sider down $1.55 d-o-d on Friday. Further declines in Azeri & BTC bring the total drop in their FOBs to nearly $4/bbl over the last two weeks. This means plenty pressure in NWE, where Azeri, CPC and Es Sider are still arbing effectively vs Forties.

Demand indications in Europe and Asia are not fantastic even though we are coming out of the maintenance season. On the back of this, we remain bearish crude timespreads short-term. However, there are a few trends coming together that could see at least temporary correction in physical premia once this glut begins to clear a little.

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