WAF and South American grades shine

Deep Dive Summary:

• Mars basis and Oct/Nov CL spread both achieved upside targets last week.
• Mars basis likely has more upside and/or forwards should roll up.
• Dubai needs to close the gap to Brent.

Financial crude oil markets rallied this past week as hostilities ramped again between the US and Iran while physical markets were strengthened by renewed interest from buyers in the Far East. With flows from AG still well below normal, the uptick in Asian demand is forcing buyers to look further afield.

US and European refinery demand should be coming out of maintenance season in November and back to very high availability in December. Both WAF and North Sea markets appeared thin this week as flat price and freight rose rapidly and traders paused.

Petroineos made waves mid-week as they booked a VLCC to make a very rare Forties-to-China voyage.

Our platform currently shows Forties as relatively expensive and offering a relatively low complex margin value. However, Petroineos had retained an August cargo in chains that likely carried a much lower differential than we are currently seeing.

According to Platts, the main North Sea grades are set to see loadings rise by a net 200kbpd in October MoM. North Sea grades moderated a little over the week on our Arbs Radar view as landed values moved from relatively expensive to more normal.

Regional light crudes priced competitively into both NW Europe and USAC by the end of the week. Medium North Sea grades are now starting to look much more workable than they had in late August.

WAF light and medium grades continue to price well into NW Europe and Far East with the USAC sneaking in as another decent alternative market. The Dangote refinery was able to secure just over 11MB of local crude grades for late September / October deliveries as well as 1.6MB of WTI for October delivery. Overall, WAF grades are pricing very well into most regions.

(WAF grades looking really competitive)

As far as medium and light grades go, Brazilian and Argentine grades are at or near the top of the list for Far East complex margins. It was reported that Petrochina had secured a 0.5MB cargo of Buzios for late October delivery.

For mid-November heavy grades, we also continue to see West Coast Americas grades outperform every other region.

(South American grades should shine in Far East)

Recently, EIA monthly data showed how US buyers have had to reshuffle crude slates in the wake of the Hormuz disruptions. Imports into PADDs 1, 3, and 5 (to reflect mostly waterborne imports) fell 388Kbpd in June of 2026 vs June 2025.

Unsurprisingly, imports from the AG fell 410Kbpd, nearly offset by increases from the Americas. Grades from the Americas jumped to 91% of the quasi-waterborne import number for June 2026, leaving only single-digit contributions from AG, Med, and WAF.

(In June 2026, crude grades from the Americas were 91% of waterborne imports)

As Latin and South American crudes are currently pricing well into Far East, the high percentage of ‘local’ grades seen in the June data may be hard to reproduce going into Q4.

Mid-October USAC arbs for heavy grades still favour the Americas, but WAF medium grades are now looking very tempting into USAC — US buyers may need to outbid the Europeans.

On the light side, WAF grades are three of the top four choices for complex refiners.

The best foreign-sourced medium grades for the USGC in October are Tupi and Isthmus, with the cheapest window landing at $5.80/bbl over the screen. Maya is the best waterborne heavy grade for October, with the cheapest window landing at -$3.40/bbl.

These waterborne replacement values for domestic/pipeline grades suggest we could see more upside in Mars and WCS Houston basis markets [respectively] for these same delivery windows.

Our long Oct/Nov CL spread and long Q4 Mars basis positions achieved their upside targets last week. Mars basis — or, more broadly, the sweet/sour spread — will likely continue to perform as long as Hormuz flows are restricted.

The Q1 and Q2 strips have potential, but low open interest and poor liquidity might have us waiting a bit longer for an entry point. We continue to hold short WTI/Brent positions in the November and December contracts, targeting the -$9/bbl area as our downside target.

Lastly, as kinetic action increases in the AG, we think Asian markets will need to price up relative to Atlantic Basin markets to attract swing barrels.