As the conflict re-escalates, e/w still looks bullish here

Deep Dive Summary:

• RBOB: bullish prompt TA arb
• EBOB: bullish EW, bullish EBOB spreads
• SING92: bullish Sing92 spreads

Flat prices globally have continued to react to the re-escalation of the conflict over the Strait of Hormuz. The conflict may look to intensify further with the threat of escalation spreading to the Bab el-Mandeb Strait, with oil tankers beginning to U-turn in the region, adding further risk to the upside.

Spreads and cracks have largely followed the move upwards but have retraced in the Atlantic basin, while Singaporean prices have displayed renewed strength.

RBOB:

US inventories have continued to decline as the summer driving season continues. With current US underlying inventories well below the historical inventory levels of the past five years, as we continue to draw over the coming weeks, NYH will have to pull in barrels.

(Houston NJA now landing cheapest into New York in August)

(HOU and TA arbs closed in the prompt, while open for mid-September onwards)

In a notable change for prompt delivery windows into New York Harbor (from August 1st to 15th), Houston on an NJA basis currently lands cheapest into the region. Thus far, waterborne supply has remained generally scant as inventories in PADD 3 (from a historical basis) are significantly lower from a seasonal inventory perspective.

A significant driver of the increased competitiveness from Houston into NYH has been the decline in underlying regional blend costs. Despite these lowered blend costs, there does remain the notable caveat of continued usage of A grade blends in NYH as opposed to F as the EPA waivers have continued to be renewed.

(August delivery windows into the Atlantic Basin)

Across mid-August delivery windows into the wider Atlantic basin, Houston appears broadly more competitive than ARA cargoes into the broader LATAM region, including Colombia, Guatemala and Tuxpan, while competition between Houston and ARA for Montreal and Santos remains close on a landed basis.

With physical flows remaining poor into PADD 1, I remain generally bullish on TA arb swap for August given the lack of margin afforded to Houston NJA or ARA exporters into the region.

Interestingly, however, the dynamic shifts entirely further down the curve in September as the TA arb opens on the spec change. ARA origin cargoes land cheapest into the Americas in the Atlantic basin for the September delivery windows, while Houston only lands cheapest into New York (NJA), Santos and Pajaritos.

This is an interesting setup and may imply that GC CBOB / RBOB diffs may need to weaken despite the relatively tight inventory levels in comparison between PADD 3 and PADD 1, with the logic that the physical premiums must correct so that these outlets become accessible.

EBOB:

(E5 margins gain with a widening gas-nap and declining blend cost over the past week)

The most notable change within the ARA over the past week has been the major gains in underlying blender margins for E5/E10 as the underlying crack picture and gas-nap have continued to gain.

Currently, E5 margins have improved significantly, up -$9.00/mt in ARA versus last week’s value of -$29.25/mt, while E10 is open for blenders at $3.25/mt.

This does lead me to believe there is less room to the upside as seen in the past week as blend costs retreat on a heightened gas-nap in crack spreads as finished gasoline has allowed for some excess supply to hit the margin.

(September 2026 E5 Blend Costs)

EBOB spreads have followed the gains over the past week, with the Sep/Oct (60 kPa/90 kPa diff) spread remaining strong. Within the blending tool, the difference in September 60/90 kPa spreads sits around $40.25/mt.

Taking this difference against the prompt spread of $83.75/mt results in a $43.50/mt seasonally adjusted spread. Despite the Dangote CDU restarting on July 25th, the broader context of the EBOB market remains generally bullish for September.

As ARA continues to land cheapest into Atlantic LATAM over Houston, support into New York Harbor, with the 60/90 kPa excluded spread trade appearing undervalued, the Sep/Oct spread appears to be generally undervalued at these levels and may provide some upside.

SING92:

Gas e/w and SING92 spreads have taken a significant leg up over the past week as the broader East of Suez market reacts to the re-escalation between Washington and Tehran.

The threat of the Bab el-Mandeb closure adds further risk to oil markets more broadly, particularly for Chinese refinery runs, which had begun to creep up on the crude made widely available during the MoU ceasefire period and SPR releases.

(Spreads globally have gained, but Sing92 has taken the biggest step up)

With that crude flow now less certain, we should expect runs to retreat over the coming months to preserve the SPR, while exports from China, as a means to protect domestic refined product inventories, will in all likelihood remain lacklustre.

(Singaporean 92 blender margins become positive once more)

This has likewise improved the blend margins within Singapore as the finished gasoline market in Asia tightens on a lack of expected supply available to the region. Underlying blend costs may take a further step back as gains in flat price incentivise underlying MTBE to return to the market as well, improving the overall blend margin.

(Singaporean origin cargoes remain globally competitive)

The gains in prompt gas e/w spreads have done little to negate the global competitiveness of Singaporean origin cargoes across Asia and Pacific-Coast North and South America. There remains further reason to maintain a bullish outlook on front gas e/w spreads as Panama Canal water levels have begun to weaken towards a point where some vessel bookings across Gatun Lake have become suspended on projected levels.

This continues to allow Singaporean cargoes to displace Houston and ARA origin cargoes not only on landed economics but now on a physical basis as well. Furthermore, risks to transits across the Bab el-Mandeb Strait may become a further bullish driver for Asian cargoes into Eastern and Southern Africa.

Overall, despite the risks of increased blend margins and a weakening outlook in blend costs in Asia, the landed competitiveness of Singaporean gasoline points towards continued gains in the gas e/w and time spreads over the coming weeks.

About the Author

Nikolas Plonski, our Oil Market Analyst for the Americas at Sparta, brings experience as a trader from Gent Commodity USA trading diesel and jet paper markets. Nikolas then joined Sparta, where he serves as a cross barrel analyst focused on the Americas.
Connect: LinkedIn

About Sparta

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