Brent Continues to Decline As Chinese VLCCs Transit Bab el-Mandeb Strait

In the news, two Chinese VLCCs carrying a combined 4mb of Saudi crude successfully transited the Bab el-Mandeb Strait on Thursday, despite the Houthis' announced blockade on Saudi shipments. According to shipping data, the Singaporean-flagged Xin Long Yang, which had paused and reversed course in the Red Sea earlier this week, resumed its voyage south on 22 Jul, followed by the Chinese-flagged Cosnew Lake. Both vessels have now exited the Red Sea and are bound for ports in southern China. Elsewhere, ADNOC has launched its seventh crude tender since early June, offering August-October loadings from both inside and outside the Persian Gulf. According to Reuters, the producer has already sold more than 74mb through previous tenders, using ship-to-ship transfers and Fujairah loadings to bypass the Strait of Hormuz. The latest tender includes cargoes from Zirku, Das Island and Fujairah, with discounted bids set to be automatically rejected. In other news, the EU has imposed sanctions on Georgia’s Kulevi oil refinery for processing Russian crude, marking the first time a major Georgian company has been targeted under EU measures. The transaction ban was included in the EU’s 21st sanctions package against Russia. It will come into effect in six months, as Brussels expands efforts to target entities outside Russia that support its oil revenues. In Japan, the country has secured alternative crude supplies for August equivalent to 100% of last year's average monthly consumption, according to Trade Minister Ryosei Akazawa. Supply has been sourced from Asia-Pacific, Latin America, Central Asia, Africa, the Middle East and the US, as Japan continues to diversify crude imports alongside government efforts to strengthen energy security. Finally, as of the time of writing, the front-month (Sep/Oct) and 6-month (Sep/Mar’27) Brent futures spreads are at $5.15/bbl and $15.05/bbl, respectively.

This afternoon in Brent/Dubai we continued to rally, with buying in Sep Brent futures vs Aug Dubai cross month, trade buying in Aug Brent/Dubai. There was some trade buying of Aug/Sep Dubai, which sold off with Dubai spreads. The Aug Brent/Dubai traded up from $6.40/bbl to $6.70/bbl, the Aug/Sep Dubai spread traded down from $2.80/bbl to $2.30/bbl. There was some crack related selling of Q1 Brent/Dubai around $2.60/bbl. Liquidity continued to be extremely thin on both the Dubai spreads and Brent/Dubai.

VLSFO weakness we saw this morning continued into the afternoon. The Aug Sing crack traded down to $19.65/bbl from $20.10/bbl. Spreads were also softer on lower crude, with Aug/Sep closing the week around $40.50/mt. Euro followed the trend of Sing 0.5. With the Euro crack in Aug selling down to $7.55/bbl while Aug/Sep Euro went fairly well offered down to $30.50/mt.

In HSFO, Chinese arbers were buying 380 flat price this afternoon resulting in the crack strengthening up to -$1.80/bbl from -$2.10/bbl. 380 spreads, however, were off a touch on lower crude, Aug/Sep 380 sold down to $25.00/mt from $26.00/mt. The barge crack traded in line with the 380 crack, with Aug a touch stronger at -$9.30/bbl. It was a similar story on barge spreads which traded down on lower crude with Aug/Sep finishing up around $9.50/mt.

This afternoon in distillates, Sing gasoil was mixed with sellside interest on flies – Sep/Oct/Nov well offered at $1.40/bbl. Outright Sing spreads were mixed and ICE gasoil driven. E/W has traded rangebound in Aug with bank buying in Q1 driven off Sing crack buying. Regrade was thin but scale back bid in Aug, trading down to -$2.30/bbl while kero spreads were better bid in aug/sep and Sep/Oct this afternoon. Prompt ICE gasoil traded rangebound through afternoon then rallying from $50/mt to $53.25/mt into the window.

Gasoline was stronger overall this afternoon. RBBRs rallied, pushing Aug arbs up from 27c/gal to 28.10c/gal, with Q4 arb trading at 24.90c/gal. EBOB was better offered overall but firmed on higher RBBRs, trading up from $33.55/bbl to $33.85/bbl, and Q1 was well offered by a refiner at $13.20/bbl. Spreads were mixed, but Aug/Sep remained near the bottom of the recent range, trading at $66.75/mt post-window. The East remained relatively strong, with E/W trading at -$7.40/bbl and Aug 92 cracks were getting lifted at $26.25/bbl.

This afternoon in naphtha was more mixed with the NWE crack moving up to -$0.05/bbl pre-window with spread buying in Europe. Aug/Sep traded up to $56/mt pre-window but sold down to $51.50/mt in the window with better crack selling coming in and weaker crude. Q4 cracks traded up to -$6.40/bbl from -$6.60/bbl and E/W was pretty balanced around $62/mt. We ran into some spread buying out the East with good size Sep/Oct buying $50/mt. 

This afternoon in NGLs, Aug/Sep FEI was trading at $40/mt, the same level as this morning, and Sep/Oct traded down from $31/mt to $27/mt. In the deferred, Dec/Jan FEI had buying at $18/mt. There was afternoon buying again in deferred LST/FEI, seeing Q4'26 trading at $262/mt, and Q1'27 at –$210/mt and -$211/mt, before settling at the prior. In the front, Sep LST/FEI was lifted at -$315/t, up $10 from yesterday’s closing level. A quiet afternoon in LST with some deferred flat price buying in Q4 and Q1'27. Aug/Sep LST was trading at -0.875c/gal, and Sep/Oct was at -0.75c/gal. In butane, Aug/Feb C4 ENT lifted at 5.875c/gal, and Aug/Sep had buying at -0.25c/gal where it settled post window. C4/C3 LST trading in Sep at 34.625c/gal. In Europe, Aug/Sep NWE was lifted at $13/mt, and the Aug/Sep/Oct NWE fly was trading at $7.50/mt.