Iran Update – 24th April – 12:00 CET – Markets hang in suspension
‘- One week has passed since the big flat price collapse upon Trump’s announcement of a ‘completely open’ SoH. Brent has crept up to 107$/bbl at time of writing as markets receive no real signals of increasing flows. More inventory reports are pointing to a big draws. Jet fuel is clearly having shortages in Europe based on the flight cancellations announced by numerous airlines.
– Physical players are feeling the tightness yet the paper markets are believing that demand destruction is already enough to suppress oil pries from rising further. We however subscribe to the view that the crude loss of 10-11 mbd is now going to take even longer to recover even with the SoH reopening tomorrow, as the longer the shut-ins are, the longer it will take for them to restart.
– Meanwhile Japan has announced a second release of crude SPR from May 1st, equivalent to 20 days of demand. This second round is expected to include Khafji crude which is notorious for high water content due to it being stored for a long time.
– South Korea has also diversified their crude feedstock with cargoes from Americas and Africa, and securing more Middle Eastern cargoes that bypass the SoH. This has allowed runrates to increase vs March and is noticeable in the additional gasoil cargoes available on the spot market.
– However Sparta is not expecting the Asian market to always remain ahead in terms of crude purchases for June replenishments, as Europe will also be starting to fight for market share in order to keep utilization of refineries higher.
– The physical premiums of products are in the meantime drifting lower in the Asia, despite buyers seen to be on hand-to-mouth status. It remains to be seen if they can keep holding out on this position as we do not think demand destruction has been that pronounced.
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