Brent Poised Despite Trump Threats

This morning the Sep’26 Brent crude futures rose to highs of $86.50/bbl before falling to $84.60/bbl over an hour by 10:00 BST, thereafter recovering to the $85.40/bbl level by 10:30 BST. Despite continued strikes by the US and Iran overnight, and even as Trump threatens to ‘knock out’ all Iranian bridges ‘unless they negotiate’, flat price appears poised to stay around the mid $80s at unless the intensity and scope of the current kinetic action escalates or expands. The price decline in the morning session comes perhaps as recent in the money longs take profit. In the news, the IMO said the Strait of Hormuz remains too dangerous for commercial vessels to transit, the most significant warning to the shipping industry about navigational safety since an interim peace deal between Washington and Tehran unravelled. The Strait of Hormuz is effectively off-limits to commercial shipping unless the US-Iran conflict can be resolved, according to Masahiro Okafuji, the chair of the Japan Foreign Trade Council. Chinese oil refiners slashed output last month to the weakest level in six years, as the industry responded to worsening demand and disruptions to crude shipments from the Persian Gulf. Processing volumes extended their decline in June, dropping 18% year-on-year to 51.24 million tons, the lowest since March 2020. Two tankers carrying Iranian oil are signalling Pakistan as their destination, an unusual move that may be an indication they are seeking a safe place to wait as the US blockade takes effect. Finally, the Sep/Oct’26 and Sep/Mar’27 Brent futures spreads are at $1.56/bbl and $6.46/bbl respectively.

This morning in Brent/Dubai was very quiet OTC, but as the Chinese turned sellers in the Dubai window we rallied in Brent/Dubai, up from $4.10/bbl to highs of $5.20/bbl in Aug Brent/Dubai. There was smalls major selling of Dec Brent/Dubai around $2.70/bbl and offering the Q4 Brent/Dubai around $3.30/bbl. The Dubai spreads initially opened stronger at $1.30/bbl in the Aug/Sep before selling off into and post window down to $0.75/bbl. There was initially selling of Aug/Sep box around $0.03/bbl, but when producer started offering Aug/Sep/Oct Dubai fly we rallied in this box back up to $0.46/bbl.

Quieter morning in Dated with Aug/Sep Dated selling down to $1.38/bbl before recovery back up to $1.45/bbl with spreads finding a floor. We saw initial buying of 7-13 Aug vs Cal Aug at $0.28/bbl and 3-7 Aug vs Cal Sep at $2.10/bbl. We also saw buying of 17-21 Aug vs Cal Sep bid at $1.42/bbl. Further down the curve we saw a major buying Q1'27 DFL again before a fund came in selling with the spread sell off.

After initial strength in VLSFO this morning. Products relaxed into midday. Aug Sing cracks reached $23.50/bbl in the Sing window up from yesterdays close of $21.50/bbl. The crack strength was mostly due to spread strength. Aug/Sep Sing peaked at $48.00/mt prior to the window. As mentioned it relaxed post window with the sing and front spread finishing up the morning around $21.15/bbl and $42.00/mt respectively. Euro 0.5 largely followed Sing 0.5 this morning, with Aug/Sep initially implied higher up to $32.00/mt roughly before finishing up the morning around $27.00/mt. The Euro crack briefly touched $10.15/bbl earlier in the morning however sold down to $8.80/bbl at time of writing.

It was a similar story on HSFO, 380 spreads were well bid at the open this morning. With a fair amount of buying out of Singapore. Aug/Sep 380 peaked at $19.00/mt prior to the window, however it weakened into the window and a size seller on cracks came in post window which saw 380 weaken. Aug/Sep 380 finished the morning around $15.75/mt. 380 cracks also weakened as a result, trading down to -$2.50/bbl from highs of -$1.50/bbl. Consequently 380 E/W came under pressure, with Aug selling down to $31.00/mt from $44.00/mt. Barge cracks benefitted from E/W weakness with Aug closing the morning around -$7.00/bbl, up from -$8.25/bbl at yesterdays close. Barge spreads were also up from yesterdays close, Aug/Sep implied up to $8.50/mt.

This morning in distillates, Sing gasoil spreads were offered in the front and hit lower on screen, with Aug/Sep trading from $8/bbl down to $6.55/bbl, last at $7/bbl. E/W was also well offered, with Aug trading from -$54/mt down to -$67/mt, while Sep traded down to -$69/mt. Regrade saw selling in the front, with Aug hit from $2/bbl down to -$0.25/bbl on kero spread selling.

Prompt ICE gasoil spreads opened higher before trending lower, with Sep/Dec trading from $160/mt down to $153.50/mt, while cracks weakened from $64/bbl to $62.80/bbl post-window in Sep. Euro jet dumped across the curve, with Aug moving from $130/mt down to $100/mt, while Q1 fell to to $95/mt. Heating oil spreads weakened while HOGOs firmed, with the Aug HOGO swap up to 30.5c/gal.

Gasoline opened supported this morning, with 92 cracks trading at $20.75/bbl before getting offered down to $20.10/bbl during the window. Spreads followed the same pattern, with Aug/Sep getting bid up to highs of $5.05/bbl before softening to $4.90/bbl. E/W firmed from -$13.35/bbl to -$13/bbl with EBOB also seeing better buyside interest this morning. Cracks traded up to $34/bbl post window and Aug/Sep got bid up from $66/mt to $68.25/mt.

This morning in naphtha, MOPJ MOC better bid with Aug MOPJ MOC getting lifted +5c. MOPJ spreads initially better bid by market markers but we see refiners sell side of Aug/Jan MOPJ flat price spread. Sep/Oct sees real buying up to $31/mt this morning but then interest flips to sell side, getting sold down to $26/mt. E/W better offered seeing Aug get sold down to $51/mt with the buying in Q1 at $29.25/mt getting taken out, offered on. Prompt crack in Europe weaker with Aug trailing down from -$1.40/bbl to -$1.85/bbl.

This morning in NGLs, there was some early FEI/MOPJ buying out of Q1 at -$66/mt. FEI opened softer today and traded down across the morning. Aug/Sep FEI traded down to $22/mt having traded at $26/mt, and Sep/Oct softened $3 to settle at $10/mt end window. As FEI flat price came off, LST/FEI found some strength, trading up to -$275/mt in Aug, having opened the day at -$285/mt. There was also Dec LST/FEI selling at the -$216/mt level. Aug FEI/MOPJ was trading at -$110/mt before strengthening to -$106/mt end window, and Q1 was trading at -$67/mt. Aug FEI/CP traded at yesterday’s closing level of $72/mt, and Sep strengthened $4 on the day to print $85/mt end window. On screen, $669/mt was hit Aug FEI flat price end window.

U.S. CPI declined 0.4% month-over-month (largest drop in 5 years), with core CPI easing to 3.5% year-over-year. Core disinflation is now evident, and inflation expectations keep drifting lower, with 2-year breakevens down to 1.90%. This backdrop points to the Fed staying on hold, and the 32bp of hikes currently priced into OIS still looks like a sell. The bigger yield concern should be the rising 30-year, now just 8bp away from cycle highs.

China's latest data dump just landed: Q2 GDP came in at 4.3% YoY, below the 4.5% estimate. Retail sales stayed weak, up just 1%, though that's an improvement from negative growth in May. H1 investment contracted -5.7%. The picture is clearly K-shaped: consumption remains soft and is falling in real terms, while investment is outright contracting. Exports continue to be the main pillar holding up growth.

Bank of America's latest fund manager survey suggests investors buying stocks aggressively should think about trimming exposure. Asset allocators have turned extremely bullish - a classic warning sign - with cash levels dropping to an "uber-low" 3.6% of assets, down from 4.1% the prior month. US equity positioning now sits at a net 24% overweight, the highest since December 2024.

Strategists led by Michael Hartnett noted the BofA Bull & Bear Indicator has hit an extreme bull reading of 9.4, signaling investors should reduce equity and high-beta exposure. The indicator runs on a one-to-ten scale. Bullish positioning is likely to keep capping summer upside for risk assets.

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The KOSPI (stop laughing) is currently down -31.3% from its most recent all time highest point. This is the 7th worst crash already in KOSPI history, which goes back to 1980. The 6 worse crashes all took a MINIMUM of 242 trading days to go from peak to trough. The current crash is 17 trading days old.

Oil refiners are posting historic profits, with the 3-2-1 WTI refining margin hitting a record $59 per barrel - nearly triple where it stood at the start of 2026 and far above the ~$10 average from 1985-2021 or the sub-$30 peak of the 2004-2008 boom. The surge stems from a severe global refining capacity shortage, driven by the Iran War, attacks on Russian refineries, and reduced fuel exports, which have knocked roughly 8 million barrels per day (about 10% of global capacity) offline. This has kept gasoline, diesel, and jet fuel prices elevated even as crude oil trades about $40 per barrel below its March high.