Brent Declines to $81.25/bbl as US Gasoline Prices Slide Under $4/gal

In the news, US average retail gasoline prices fell below $4/gal for the first time since mid-April, fuelled by optimism that a preliminary deal between the US and Iran could lead to reopening the Strait of Hormuz. This decline in fuel prices may bring some relief to the Trump administration, which had vowed to lower energy costs for consumers. As Trump and Republicans campaign to maintain narrow majorities in both congressional chambers in the November midterm elections, they face criticism over rising fuel prices. Related, US crude oil stocks in the Strategic Petroleum Reserve has fallen to 340.3mb, the lowest since 1983, per the Department of Energy. The reserve fell by 8.9mb, the third-largest draw, as part of a 172mb loan to reduce fuel prices, which surged to multi-year highs. Overall inventories, including commercial stocks, decreased to 77.6mb, the lowest since 2023, after the February start of the Iran war. Elsewhere, shipowners are unlikely to restart transit through the Strait of Hormuz for several weeks until they see that the US-Iran peace agreement is genuinely significant, the CEO of Japan's Mitsui O.S.K. Lines told the Financial Times in an interview. "We ‌recognise that there are signs of movement toward a ceasefire. However, operations will not be resumed until safety has been sufficiently confirmed," according to Mitsui O.S.K. in an emailed statement to Reuters. The company added that "the resumption of transit will require close coordination with the governments of the relevant countries, insurers, and other stakeholders." In other news, an overnight fire at the Moscow oil refinery has been extinguished and has reportedly not affected operations. Finally, at the time of writing, the front-month (Aug/Sep) and 6-month (Aug/Feb) Brent futures spreads are at $0.69/bbl and $3.94/bbl, respectively. In the news, US average retail gasoline prices fell below $4/gal for the first time since mid-April, fuelled by optimism that a preliminary deal between the US and Iran could lead to reopening the Strait of Hormuz. This decline in fuel prices may bring some relief to the Trump administration, which had vowed to lower energy costs for consumers. As Trump and Republicans campaign to maintain narrow majorities in both congressional chambers in the November midterm elections, they face criticism over rising fuel prices. Related, US crude oil stocks in the Strategic Petroleum Reserve has fallen to 340.3mb, the lowest since 1983, per the Department of Energy. The reserve fell by 8.9mb, the third-largest draw, as part of a 172mb loan to reduce fuel prices, which surged to multi-year highs. Overall inventories, including commercial stocks, decreased to 77.6mb, the lowest since 2023, after the February start of the Iran war. Elsewhere, shipowners are unlikely to restart transit through the Strait of Hormuz for several weeks until they see that the US-Iran peace agreement is genuinely significant, the CEO of Japan's Mitsui O.S.K. Lines told the Financial Times in an interview. "We ‌recognise that there are signs of movement toward a ceasefire. However, operations will not be resumed until safety has been sufficiently confirmed," according to Mitsui O.S.K. in an emailed statement to Reuters. The company added that "the resumption of transit will require close coordination with the governments of the relevant countries, insurers, and other stakeholders." In other news, an overnight fire at the Moscow oil refinery has been extinguished and has reportedly not affected operations. Finally, at the time of writing, the front-month (Aug/Sep) and 6-month (Aug/Feb) Brent futures spreads are at $0.69/bbl and $3.94/bbl, respectively. 

VLSFO characterised the complex yesterday, which continued this morning. Sing cracks were offered down on screen early on. The Jul sing crack traded down to $9.50/bbl, we did see some recovery post window up to $9.80/bbl. Spreads came under a lot of pressure on lower crude, with Jul/Aug selling down to $10.00/mt from $12.75/mt. Euro cracks were buoyed by 0.5 E/W selling resulting in the Euro crack not moving much even in the face of Sing crack weakness. The Euro crack remained around $3.00/bbl for the majority of the morning. Euro spreads were not liquid, however implied slightly lower on crude with Jul/Aug Euro marked around $13.75/mt.

There didn’t seem to be large axes in the HSFO market this morning. Spreads drifted down on lower crude, Jul/Aug traded down to $3.25/mt from $4.50/mt, however we did see some rebound post window back up to around $4.00/mt. 380 E/W came under some pressure this morning on bearish sentiment in the market, trading down to $15.00/mt from yesterday's close of $16.25/mt. 380 cracks were a touch weaker down to -$6.40/bbl on spreads trading lower, however, proved fairly resolute post window closing around -$6.15/bbl. Barge cracks were a touch stronger after a weak GC window trading up to -$8.40/bbl from last night's lows of -$8.70/bbl. Barge spreads were not hugely liquid this morning, however, Jul/Aug did trade down a touch to $2.50/mt.

This morning in distillates, Sing gasoil was mixed with buying in Oct/Nov and selling in Aug/Sep. E/W was sellside in Jul, trading down from -$35/mt to -$42/mt. Q4 E/W also priced down where it found buying at -$35.25/mt. Regrade was better supported today, with buying in Jul up to -$0.50/bbl. Kero spreads were scale back bid on lower ICE gasoil, dropping from $1.30/bbl to $1/bbl in the front.

Prompt ICE gasoil spreads sold off into the window down to $14/mt in Jul/Aug, where it then found support and rallied back up to $16/mt. Aug cracks saw similar flows, dropping from highs of $40.25/mt pre-window to $39.30/mt. European jet diffs were weak, trading down to $67/mt in Jul but finding support. Heating oil spreads sold off over the morning while the M1 HOGO swap traded rangebound between 29.9c/gal and 30.4c/gal.

This morning in gasoline, Sing 92 flat price traded end window at $98.30/bbl with MOC well bid. Gasoline was weaker overall, with 92 cracks getting sold down from $18.50/bbl to $18/bbl, but Q1 was bid by a tradehouse up to $8.80/bbl. Spreads were slightly more balanced in the front, as Jul/Aug softened from $3.90/bbl to $3.80/bbl but Sep/Dec was offered down to $5.60/bbl. July E/W had some sellside interest at -$7.10/bbl as EBOB cracks sold off from $25.90/bbl to $25.20/bbl in July, with Q4 valued at $11.90/bbl. Spreads weakened with front cracks coming off, as Jul/Aug traded down from $24.25/mt to $22.75/mt.

This morning in naptha, MOC flipping from better offered to better bid, with July MOC trading between -5 and +5c. E/W initially weaker in the morning, getting hit down to $30/mt in July beginning of day, but implied higher end of window with little outright interest. Physical players were on the buyside of the Q3/Q4 crack roll, strengthening from flat to $0.35/bbl implied bid end of window. Prompt cracks strengthening with July naphtha crack trading up from -$9.10/bbl at yesterday's close to -$8.60/bbl at end of window, with Q1 getting lifted at -$8.70/bbl. Major buyside of July/March naphtha.

This morning in NGLs, FEI and CP flat price continued to come off, and as a result we had stop-out buying across spreads and flat price in the front. FEI/CP traded at $20/mt before rallying to $25/mt post-window. Pre-window there was also some pronap buying out of Jul at -$133/mt, before it weakened slightly to settle -$135/mt post-window. FEI spreads continued to sell off across the morning, with Jul/Aug trading at $10/mt, having opened at $16/mt. Aug/Sep was getting lifted at $3/mt, $5 weaker than last night’s close. End window on screen, Jul FEI flat price was lifted at $600/mt on screen.

Nasdaq and S&P futures make all-time highs with cash equities just off the peaks, precious metals and crypto also enjoy the risk on sentiment but despite the sell-off in crude, and the resulting calls for lower inflation, the 30-year yield closed higher on the day.

On its second day of trading SpaceX stock climbed 20%, extending Friday’s 19% rally, to add $412 billion in market value. Shares closed at $192.46 on Monday, more than 42% above their $135 IPO price. The move boosts the company’s market value to more than $2.5 trillion, putting it among the top six largest companies in the world. At its current market capitalization, it’s less than $135 billion away from overtaking Amazon, which is close to $2.7 trillion value.

Mixed Chinese data with fixed asset investment falling 4.1% YoY (estimate -2%), retail sales -0.6% YoY (est 0%), while industrial production rose 4.5% (est +4.3) and unemployment fell from 5.2% to 5.1%.

Secondary US data came in weaker, industrial production +0.1% MoM (est +0.3%), NY Empire State manufacturing index +5.7 (est 14, prior 19).

The Bank of Japan officially hikes interest rates to 1%, the highest level since 1995 amid rising inflation.

The Strategic Petroleum Reserve has just fallen to its lowest level since August 1983- 340.3mb. That's a 42-yr low.

SanDisk is officially the most overbought stock in history as its RSI breaks above 99.