Brent Climbs as Asian Refiners Turn Away From The Red Sea

In the news, Asian refiners are increasingly seeking to ship Saudi crude from the Red Sea port of Yanbu via the Suez Canal and around the Cape of Good Hope after Yemen's Iran-aligned Houthis announced a naval blockade on Saudi Arabia. Two tankers carrying Saudi crude to Asia have reversed course in the Red Sea on Tuesday following Houthi threats, while traffic through the Strait of Hormuz continued to decline. The alternative route is expected to add up to four weeks to transit times and significantly increase freight and fuel costs. In the US, Treasury Secretary Scott Bessent said China's crude imports have fallen around 40% over recent months, citing sanctions on independent Chinese refineries and lower purchases of Iranian oil. He said the decline is putting direct pressure on the Iranian regime. In Serbia, fuel imports have fallen to just 25% of their July target after record-low water levels on the Danube disrupted barge deliveries, according to the country's energy minister. The disruption has exposed Serbia's reliance on its Russian-owned NIS refinery, which supplies around 80% of domestic fuel demand. With barges operating at just 30-40% of capacity, fuel is increasingly being transported by road and rail, driving costs even higher. In other news, Kyrgyzstan has agreed to build a $25M mini refinery in the south of the country as it looks to reduce its reliance on Russian fuel imports amid tightening supplies. The 450kt/yr refinery will be financed by Kyrgyz-Chinese firm Central Asian Energy and will produce K5/K6 standard gasoline and diesel, alongside bitumen and motor oils. The first phase is expected to be completed in autumn 2026. Kyrgyzstan currently imports more than 90% of its gasoline from Russia, where refinery disruptions have tightened fuel availability. Finally, as of the time of writing, the front-month (Sep/Oct) and 6-month (Sep/Mar’27) Brent futures spreads are at $4.24/bbl and $14.21/bbl, respectively.

This morning in Brent/Dubai, into the window we saw large selling of Brent/Dubai by major and trade, as we traded down from $4.20/bbl to $3.20/bbl. There was equal buying of all of the Dubai spreads, Aug through Dec Dubai spreads well bid. The Aug/Sep already gapped higher in the morning and traded up from $2.80/bbl to $3.30/bbl. However after the window, we saw producer, refiner and Chinese buying of Sep vs Oct cross-month, Aug and Sep Brent/Dubai. We traded up reversing the whole move lower back up to $4.20/bbl. The boxes were well offered into the window and better offered post the window. There was large selling of 2027 quarterlies, the Q2 Brent/Dubai offered in size around $1.40/bbl, and good selling of May 2027 Brent/Dubai.

VLSFO strength we have seen this week continued this morning with buying on spreads to begin the day. Aug/Sep Sing traded as high as $50.00/mt post window before relaxing into lunch down to $48.50/mt. The Aug Sing crack followed the trend of spreads trading up to $23.20/bbl before retreating to $22.50/bbl at the end of the morning. Euro spreads were well bid off the back of agro x-arb buying trading up to $32.50/mt before relaxing off the back of Sing spread weakness back down to $31.25/mt. The Euro crack followed suit trading up a touch to $8.40/mt.

In HSFO, 380 enjoyed a very strong start to the morning. Aug/Sep 380 was well bid and this continued throughout the morning. Aug/Sep traded up to $29.00/mt from $22.00/mt at yesterday's close. E/W was also well bid with Aug trading up to $53.50/mt while the Aug 380 crack turned positive, trading up to $0.25/bbl. Barges were largely unmoved, the crack traded up a touch however ended the morning where we closed last night, around -$8.40/bbl. Barge spreads were a touch higher due to 380 strength and crude, with Aug/Sep up to $9.50/mt.

It was a volatile morning in gasoline. The East opened very strong with MOC well bid. Cracks got lifted from $27/bbl to $28.10/bbl in Aug before getting sold back down to $27.20/bbl, and spreads traded up from $6.95/bbl to highs of $7.75/bbl. E/W roofed, with Aug seeing aggressive buying from refiners all the way up from -$10.40/bbl to -$7.65/bbl before coming off to -$8.75/bbl post window. EBOB was supported but wasn’t as strong as the east: cracks remained rangebound around $35.65/bbl with Q4 bid up to $18.20/bbl. Spreads opened strong with Aug/Sep trading at $75/mt but got sold down to $71/mt on weaker barges and RBBRs.

Very bid morning for naphtha. MOC better bid in both Aug and Sep, with Aug MOPJ MOC getting lifted 5c, 15c, 25c - up to 50c end of window. Aggressive buying in Aug/Sep MOPJ with prompt E/W rallying, seeing Aug E/W trade up from $60/mt this morning to highs of $73/mt, with some selling in Oct+Nov E/W strip from a trade into end of window at $42.50/mt. Scale back selling in Sep/Oct/Nov MOPJ fly, trading up to $19/mt. Aug nap crack trades to highs of $1.90/bbl during window but comes off slightly post window down to $1.50/bbl.

This morning in NGLs, Chinese came in sell-side of FEI flat price, with Sep trading at $705/mt and Oct at $677/mt. FEI flat price was stronger on the day, and LST/FEI came off in both Aug and Sep from yesterday’s closing levels. Aug LST/FEI traded down to -$365/mt, having closed yesterday at -$343/mt, and Sep was trading at -$315/mt end window, down from -$298/mt last night. Had some deferred FEI spread buying, with Oct/Nov trading at $17/mt, and Sep'27/Dec'27 was lifted at -$11.50/mt. Prompt Aug/Sep FEI spread came off slightly on the day, trading down to $45/mt, having opened the day trading at $49/mt, before eventually settling at $47/mt end window. FEI/MOPJ buying out of Aug at -$128/mt and -$126/mt, and the Aug CP/MOPJ was also trading at -$250/mt. End window on screen, Aug FEI flat price was getting lifted at $765/mt.

AI Is Back. Bonds Are Breaking. Nobody Seems to Care About the Second One.

The AI Trade Roars Back
Nasdaq +1.9%, SOX bouncing over 5%, Micron surging 12%-plus. Chipmakers led, geopolitics were ignored, and AI is firmly back in favour. Consumer Staples, Financials, and Real Estate lagged. When semis rip and defensives fade, the market is sending one signal: risk on.

The Bond Market Is Quietly Screaming
U.S. 30-year yields sit just 6bp from cycle highs. UK 30s are 10bp off theirs. The long end of the curve is tightening the screws while equity markets celebrate. This is the story nobody wants to tell - and usually the one that matters most. Watch this slowly unfold.

Oil, Gas & A Risk Premium Equity Markets Are Ignoring
WTI settled at $84.90, Brent at $91 - up 2% - as U.S.-Iran strikes and Houthi threats to Red Sea shipping continue to escalate. European gas prices are climbing in tandem. Energy markets are pricing in a geopolitical risk premium. Equity markets are not.

Dollar, Gold & the Sidelines Trade
USDJPY broke through 163 - a 40-year high - as currency markets price U.S. outperformance and relative policy tightening. Gold broke out of its recent range with a 4% move over four days. With silver, platinum and palladium recovering alongside it. Cash on the sidelines has fallen to a record low - the dry powder that historically cushions drawdowns is gone.

Tariffs Tighten
Trump is preparing 10% tariffs on dozens of countries this week per the FT, with 100% tariffs on generic drugs from August 2028 rising to 200% a year later. The policy direction is clear - and the second-order effects on margins, supply chains, and inflation are still being underpriced.
Oracle: A Credit Warning Worth Taking Seriously
Oracle's 5-year credit default swaps hit 198bps - a record high, surpassing even 2008 peaks - after S&P downgraded the stock to BBB-, one notch above junk.

U.S. margin debt sits at historic extremes. When credit and leverage flash red simultaneously, history suggests paying attention.

Uranium: The Supply Math Simply Doesn't Work
Global nuclear capacity is projected to grow 44% over the next decade. Each new 1GW reactor requires ~400 tonnes of uranium for its initial core load, plus ~160 tonnes annually thereafter. The first core loads alone for currently planned reactors would consume uranium equivalent to nearly 90% of today's entire annual global mine output. The supply story is becoming impossible to ignore.

AI rallies get the headlines. Bonds, credit spreads, a 40-year dollar high, and a uranium supply gap write the next chapter. Stay alert.