Brent hits $102/bbl as geopolitical uncertainty fuels bullish sentiment

Several US military aircraft have suffered damage in an Iranian attack at Muwaffaq Salti Air Base in Jordan overnight Tuesday. TotalEnergies on Thursday announced a new oil discovery in Angola and signed agreements to buy a 40% operated interest in two new exploration blocks in the country. Tanker rates are surging to record levels as the Iran war, Hormuz disruptions, Red Sea attacks and longer trade routes create severe shipping bottlenecks, with VLCC earnings on key routes approaching $800k/day and expected to remain elevated into next year. Chinese refiners are paying record premiums for Russian ESPO and other seaborne crudes as US restrictions squeeze Iranian supply, with ESPO offers reaching $20+/bbl over Brent and West African/Brazilian grades as high as $30/bbl, highlighting how tight China’s crude sourcing options have become. NY Harbor diesel prices hit their highest since 2022 as Middle East tensions, record-low Atlantic Coast inventories, elevated exports and upcoming Saint John refinery maintenance tighten regional supply ahead of seasonal diesel demand. Canada is loosening environmental rules and offering incentives to accelerate oil sands investment, with Ottawa confident producers can fill over 2 mb/d of planned new pipeline capacity and diversify exports toward Asia amid trade tensions with the US. South Africa plans to revive the idled Sapref refinery, potentially lifting domestic refining capacity from 208kb/d to 400kb/d initially and 650kb/d eventually, reducing its heavy reliance on fuel imports, which now account for around 61% of supply. Finally, the Nov/Dec’26 and Nov/May’27 Brent futures spreads are at $4.36/bbl and $17.70/bbl respectively.

Very strong opening in Dated, with front of the curve opening a dollar higher, 14-18 Sep 1-week roll paid at $3.10/bbl on the back of aggressive refiner buying of 10-16/9 v Cal Oct at $12.25/bbl. Balmo moved higher with $11/bbl last trading but implied closer to $11.70/bbl now, whilst sellside interest in 28-2 2-week roll continued, trading $5.15/bbl and $5.20/bbl. Oct and Oct/Nov DFL both moved higher, Oct reaching highs of $6.60/bbl and Oct/Nov $2.05/bbl.

380 saw deeper liquidity this morning particularly in the prompt spread, MOC was heavily bid and spreads traded higher, despite selling down from $26.50/mt to $24.00/mt in the early morning Oct/Nov rallied aggressively closing out the window at $29.75/mt. Oct 380 crack also saw real buying, getting bid up on screen from -$4.50/bbl to -$3.00/bbl, before selling back down to -$3.50/bbl post window. Barge complex was better offered this morning, Oct/Nov sold off from $13.00/mt to $11.50/mt while Oct crack opened 50c lower this morning at -$12.30/bbl and continued to sell down to -$13.40/bbl. 380 e/w has therefore been implied and traded much higher, up from around $50.00/mt to $62.00/mt.

The fuel market was whippy this morning, Sing 0.5 spreads were thinner this morning with Oct/Nov was choppy initially trading down from $36.50/mt to $35.25/mt before getting bid up to $37.50/mt through the window. Oct Sing crack was also choppy initially trading higher from $18.50/bbl up to $19.45/bbl before getting offered back down on screen to 18.50/bbl. Euro spreads have yet to trade this morning however Oct Euro crack has lacked support post window selling off from $3.10/bbl to $1.90/bbl, 0.5 e/w has therefore been implied higher at $103.50/mt.

This morning in distillates, Sing gasoil spreads saw decent selling in Oct/Nov, trading from $7.2 down to $6.6/bbl. Front EW collapsed from -$92.5 down to -$102/mt, trading there last. Kero spreads saw some selling in Q1, while regrade remained fairly quiet, Oct trading at -$2.3/bbl. Prompt ICE gasoil spreads opened lower and then sold off, with Oct/Nov moving from $70.0 down to $67.5/mt while Nov cracks also sold off down to $74.4/bbl.

This morning in Gasoline, MOC very well offered in the east with sellers stepping down aggressively end of window in Oct, with balmo MOC seeing buying up to +3c. EW better offered with refiners selling at -$6.6/bbl despite buying in 92 spreads this morning, seeing Oct/Dec getting lifted $14.4/bbl for decent size with Oct/Nov trading up to $8.55/bbl shortly post window. EBOB cracks stronger this morning from yesterdays sell off, with Oct EBOB crack finding some buying at $30.3/bbl end of window.

This morning in naphtha was weak, with MOC balanced vs the usual bid tone, and front E/W and spreads offered. Outright MOPJ cracks were illiquid, but Q1 traded early at $0.35/bbl, while a decent volume of flat-price selling end window implied Oct around $1.90/bbl; spreads were offered down initially before recovering, with Oct/Nov opening at $31/mt and coming back to $32/mt, Nov/Dec firm around $32/mt and the rest of the curve illiquid. Prompt E/W was weak before turning bid at the lows as Oct traded down to $58/mt, and the Oct/Dec box came off to $1 vs $4.5 at close; the backend was more stable, with Q1'27 around $47–47.50/mt. NWE naphtha cracks opened softer, with Oct down to -$4.60/bbl from -$4.20/bbl last night, while the backend was stickier as Q1 held around -$4.85/bbl, Cal'27 at -$6.80/bbl, and Q2/Q3'27 roll trading at $0.85/bbl; spreads were mostly illiquid outside of the front and offered, but Bal-Sep/Oct traded $21/mt, with Oct/Nov firm at $31.50/mt.

This morning in NGLs, FEI was weak, with the phys window getting hit. FEI flat price traded down to $834/mt by the end of the window, with Oct/Nov trading at $36/mt and Nov/Dec at $33/mt. FEI was slightly supported on the way down by buying in both FEI/CP and CP. FEI/CP initially rallied on importer buying, with Oct trading up to $197/mt and Nov to $174/mt. However, Euro trade subsequently sold into the strength, pushing Nov back down to $170/mt. CP flat price was scale-back bid, with Oct trading down from $645/mt to $642/mt over the course of the morning. As FEI weakened, the arb rallied, with Oct buying up to -$383/mt and Q4 up to -$355/mt. In contrast, Q1 arb saw selling at -$279/mt putting additional pressure on FEI spreads.

After Bessent said “I am the house”, yesterday US Treasury just announced it is tripling long-term buybacks to $6 billion and yields STILL rallied on the news, 30-year up 4.5bp…..

THEN Trump announces overnight, if the GOP wins both the House & Senate the mid-terms he will give every American $5000. Just another $1.3 trillion add to the $40 trillion deficit….. Got gold? Buy hard assets.

Then in the UK. Burnham said social security is more important than , UK 30-year rallied 7bp.
US Technology, Media and Telecom profit margins have hit a record 24% - double their 2022 lows, nearly 10 percentage points above their historic trend, and 2.7x higher than the rest of the market - with the AI revolution the primary driver of a profitability transformation that has no real historical precedent. The critical question is whether these margins are structurally permanent or whether competition, regulation, and the weight of capital chasing the same opportunity will eventually compress them - as they have in every prior cycle.

US diesel now fetching more than $200 per barrel. Highest print of the Hormuz crisis thus far, only two days closed at the height of the April 2022 crisis closed higher.

Schwab retail activity in August shows investors selling the software rip and buying the semiconductor dip.

While USDJPY sits on long term support, bracing for a break of the carry trade (Yen funding asset purchases): ...Burnham declared that national security "can't come at the expense of social security,"

The S&P back at key support