Spread vs outright

ICE Brent and WTI’s entire forward curve sold off yesterday by about 3$/b, as the whole commodity complex suffered from a continued rise of the dollar. However, time spreads remained tight, with ICE Brent M1-M2 at 95 cents. The uncertainty revolving around the OPEC production policy path remained elevated, with no ongoing negotiations reported. 

Saudi Arabia published their crude OSP (official selling price) yesterday. The Saudis increased their crude price differentials to Asia, showing both that they were not engaging in any “price-war” with the UAE but also to keep some barrels for the summer burn season.  

Looking at the physical market, Urals crudes, sold on a spot basis for 10-25 days and usually processed by NWE refiners, are sold at a heavy discount to seasonal averages. Looking at European margins, this repricing reflects the weak product prices in Europe, embodied by an ICE Gasoil crack at 6.1 $/b at the prompt.  

The API survey this evening should give us more information about the state of the US petroleum market, where we expect inventory draws in crude oil stocks.

Urals price against Dated Brent
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