Brent gaps higher but is slipping

This morning the Sep’26 Brent crude futures initially opened $3 higher from Friday’s close at $79/bbl before falling to $77.35/bbl by 10:30 BST (time of writing). While prices opened higher as the US and Iran traded strikes over the weekend, Brent is seeing firm resistance at the 200-day moving average. According to Kpler, the number of vessels transiting through the Strait of Hormuz fell to 5-week lows on Sunday, with only six vessels going through on Sunday. South Africa plans to expand its strategic oil reserves to cover 60 days of demand for the first time since apartheid, aiming to strengthen energy security against future supply disruptions. Analysts and traders expect China’s crude imports to recover in Q4 as refiners resume buying Middle Eastern crude and strategic stockpiling returns. Finally, the Sep/Oct’26 and Sep/Mar’27 Brent futures spreads are at $0.17/bbl and $2.55/bbl respectively.

Quiet morning in dated with limited flow. We saw Chinese buying cal Jul vs Aug Dated in decent size. Also saw Chinese selling Aug Dated vs Sep ICE down to -$0.18/bbl, pushing down Aug DFL to around -10 dated to lead. We saw some selling of 16-22 Jul vs Cal aug at -$0.60/bbl and selling of 10-14 cal Aug. Further down the curve, saw strong Q1 buying from a refiner and major

Spreads were well bid to start the week on VLSFO. The buying was fairly aggressive down the curve in 2026 with Aug/Sep Sing trading up to $30.50/mt from $26.75/mt on Friday. However, in the window we saw some sell side pressure coming into the market on spreads which resulted in the Aug/Sep relaxing post window closing the morning around $29.00/mt. The Sing crack largely moved with the spreads opening stronger this morning trading up to $18.00/bbl before closing the morning around $17.80/bbl. Euro 0.5 was largely stronger as a result of Sing 0.5 strength, with the Euro crack up to $7.30/bbl from Fridays close of $6.50/bbl. Euro spreads were also up a touch with Aug/Sep trading up to $21.00/mt from $19.50/mt.

The 380 crack was a bit of a roller coaster this morning, it started the morning better bid off the back of 380 spread strength, however it traded down as the day progressed to close around -$4.90/bbl. As mentioned, 380 spreads were better bid with Aug/Sep trading up to $6.25/mt from Fridays close of $3.75/mt. 380 E/W continued to see buy side axes with Aug closing the morning around $23.50/mt. Barges didn’t have a large axe and finished the morning a touch lower relative to Friday night, around -$8.55/bbl in Aug. Barge spreads were largely unmoved with Aug/Sep implied around $3.75/mt

This morning in distillates, Sing gasoil spreads saw buying in Sep/Dec, trading at $12.60/bbl and $12.65/bbl, while E/W saw support in the front, with Aug moving from -$68/mt up to -$63/mt and Q4 firming to -$58/mt. Regrade was bid in Aug at -$2.50/bbl, while kero spreads were offered in Aug/Oct.

Prompt ICE gasoil spreads opened higher before trading rangebound, Aug/Sep between $41/mt and $43/mt. Cracks also traded higher overall, with Sep up to $56.80/bbl. Both heating oil spreads and HOGOs were rangebound, Aug HOGO swap around 30.6c/gal.

This morning in gasoline, flat price traded end window at $94.80/bbl with MOC balanced. The east opened stronger on weekend news, with cracks at $16.60/bbl and got lifted to $17.20/bbl before softening post window. Spreads were also stronger to start, with aug/sep trading at $3.15/bbl, Aug E/W opened at -$14.80/bbl and remained balanced at that level. EBOB cracks firmed from $31.80/bbl to $32/bbl and front spreads were supported with Aug/Sep trading up from $60/mt to $60.50/mt.

This morning in Naphtha, MOC better bid with +5c, getting lifted in Aug MOPJ MOC. Flat price spreads are better offered on higher crude, with selling interest in Sep/Oct Naphtha from a fund. E/W initially stronger in the morning with some physical players buyside of Aug and Sep MOPJ flat price, but comes off from $46/mt to $45/mt in Aug. Selling interest in Dec MOPJ this morning.

This morning in NGLs, there was some early FEI flat price buying out of Sep at $623/mt. FEI spreads opened stronger than Friday’s close, with Aug/Sep getting lifted at $16/mt, and Oct/Nov trading at $5/mt, up from $12/mt and $3.50/mt respectively. Spreads came off slightly on the day, and by close Aug/Sep was trading at $15/mt. Aug LST/FEI opened the morning trading at -$250/mt and strengthened to settle at the trading level of -$246.50/mt end window. Also had selling of the Sep LST/FEI at -$230/mt. As FEI softened on the morning, FEI/CP came off from trading at $60/mt to $55/mt. End window on screen, Aug FEI flat price was lifted at $630/mt.

Reaction to the Middle East strikes over the weekend sees Brent +$3, the U.S. 2-year yields at cycle highs, precious metals fall (silver -2.8%, gold -1.6%) and the Kospi falls another -8.9% this morning. Taiwan also down -2.8%.

US M2 just posted its largest monthly increase in five years as global money supply is resuming its upward trend driven by major governments' deficit spending, which may push risky assets higher in the next months while keeping persistent, above-target inflation as money velocity also rises

Hedge funds turned net buyers in the latest COT reporting week to 7 July.

The surge in US electricity prices is just getting started due to relentless data centre demand

JSilicon Data token expenditure continues to fall. The index tracks the blended price the market actually pays per token, so when it falls, it usually means users are shifting volume toward cheaper open-weight models rather than premium frontier ones. Traders watch this because it works like a gauge on demand for frontier "quality" versus cost, and a sustained fall suggests that premium is compressing, which has implications for compute demand and provider pricing power.

Consensus estimates for S&P 500 earnings over the next 12 months hit $365 per share, nearly double the cyclically adjusted figure (past 10-year earnings adjusted for inflation) of $188, according to Bloomberg. As a result, forward 1-year earnings now exceed cyclically adjusted earnings by more than 90%, the widest gap on record. By comparison, this metric peaked at ~65% during the 2000 Dot-Com Bubble. In other words, the gap between what Wall Street expects companies to earn next year and what they have earned on average over the past decade has never been wider

Bond equity correlation continues to fall, bad news for investors

Companies are issuing more stock than they're buying backThe spread of single stock implied volatility to the S&P implied vol is the widest ever. (Chart. Zerohedge)

Japans 10-year yield fell 16bp on Friday, and 30-year fell 13bp after after Japan's Finance Minister said the government wants to encourage pension funds, including the $1.8 trillion Government Pension Investment Fund, to increase investment in domestic assets.

Data this week includes 10% of S&P earnings reports:
Tuesday – US CPI
Wednesday – US PPI, China Q2 GDP
Thursday – US retail sales & Philly Fed, TSMC earnings
Friday – UMich inflation expectations & consumer sentiment, EZ CPI