Crude higher as equities bounce

Most notable moves today are in crack spreads, where fuel oil and gasoil cracks in europe lost almost $1 from the close of yesterday. In heavy fuel oil there seems to be a sense of profit taking as sweet/sour crude differential has retraced a little of late as well. On this, we have heard lots from minor Opec members but non from Saudis as yet, hence it is still not a certainty what they will do in the upcoming meeting. In middle distillates however, the short lived rally yesterday was probably due some end users further out the curve and sellers were quickly back in this am. Given Gasoline cracks remained stable, refining margins are now at its low of the year. With product stocks filling storage to the brim, demand falling off the cliff and crude stocks beginning to draw out, margins will likely stay low. This is further pressured by big refineries coming on line (eg, Reliance in India) later this year.


Crude prices are a little stronger today, following a bounce in equities yesterday. Given JPY weakness, gold going softer, this bounce may have some more room to run and will probably take crude prices a little higher. SFOT added a little more of Z9 Brent length. The DOE data today is another lottery, however, there is a sneaky feeling the data will be more bullish of Gasoline and Crude and less for distillates if API data released yesterday proves to be any good preview. This will clearly impact spreads as mainly in WTI. SFOT has no position here but is however tempted to be long of some of these front end spreads.