Brent Rebounds To $72/bbl; China calls for unhindered shipping flows through Hormuz

Looking at the wider picture, Brent is slowly grinding lower and looks set to test the $70 support level, but the bearish momentum is decelerating. In the news, China will lower domestic retail prices for gasoline and diesel from Saturday, marking China's single biggest reduction in more than six years and lowers retail fuel prices to less than 2% ⁠above pre-war levels. Trans Mountain Corp will build a new 1mb/d pipeline connecting Alberta’s oil sands to a Vancouver-area port, according to Prime Minister Mark Carney. China called for the unhindered flow of shipping through the Strait of Hormuz, comments that come as leading European powers are apparently accepting that vessels will have to pay fees to Iran and Oman. Eneos Holdings, Japan's biggest oil refiner, has stabilised its oil procurement and secured sufficient alternative crude supplies through September after the Iran war disrupted Middle Eastern supply, its chief financial officer said. China’s Shandong independent refineries have returned to the regular oil market, having taken at least two VLCCs of Middle Eastern crudes for August delivery, one carrying Iraqi Basrah Heavy and the other Qatari Al Shaheen. The last time these two plants took regular Middle Eastern crude was in March 2025. Continued attacks on Russian refining infrastructure weighed on Russian refined product exports in June, amid domestic shortages, freeing up more crude for international deliveries. Finally, the Sep/Oct’26 and Sep/Mar’27 Brent futures spreads are at -$0.25/bbl and $0.12/bbl respectively.

This morning in Brent/Dubai we initally rallied into the window, trading from $5.85/bbl to $6/bbl. There was some selling of cross month Oct Ice vs Aug Dub by Chinese in the morning. Following the window we immediately sold off, refiner selling of Sep B/D. The Aug B/D quickly sold off from $6/bbl to $4.8/bbl on very thin liquidity. There was some buying of Bal Jul/Aug by refiner, which despite a weaker print traded up from -$2.25/bbl to -$1.5/bbl. The Aug/Sep spread was initially sold during the window, trading down from -$1.5/bbl to -$1.65/bbl before rallying to -$1.11/bbl on thin liquidity, some fund buying. The boxes were very quiet, some trade buying of Aug/Nov box at $2.25/bbl and $1.15/bbl.

380 saw buying interest all morning, particularly Aug/Sep 380 which rose from 50c to $1.75/mt. Barge cracks weakened with selling seen from funds, which helped to push prompt EW to $20/mt. Action further down the curve was fairly muted with Cal 380 cracks lifted -$8.00/bbl and spreads mostly unchanged down the curve from Oct/Nov downwards.

Low sulfur fuel was weaker this morning with Sing 0.5 crack selling on screen driving down the complex. Cracks reached lows of $12 before bouncing, which pushed Aug/Sep Sing 0.5 to lows of $12.25/mt. Backend crack buying interest remains, with interest on Q4 and Dec Euro cracks from European physical players. Cal Sing 0.5 crack saw buying interest around $6.60/bbl, which implied Oct/Jun Sing 0.5 decently lower without much volume trading. Aug 0.5 EW was initially bid $52/mt, but came under pressure from Eastern weakness and buying on Euro cracks from a European major, implied $50.50/mt.

This morning in distillates, Sing gasoil spreads saw some physical selling in the front, with Sep/Oct trading at $3.05/bbl, while Aug/Sep moved from $3.0 down to $2.95/bbl last hit. Front EW sold off early on to -$52/mt in Aug, before rallying post-window to -$49.5/mt lifted on screen. Kero spreads were offered, with Aug/Sep trading down to $2.2/bbl, while front regrade was hit down to -$1.75/bbl, where it found a floor.

ICE gasoil spreads weakened slightly, with Sep/Dec trading from $80.0 down to $77.5/mt, while cracks sold off to $45.7/bbl in Sep futures. Heating oil spreads weakened, while HOGOs were rangebound, Aug swap trading around 29.1c/gal.

This morning in gasoline, flat price traded end window at $90.65/bbl with MOC better bid. The East was supported, with cracks trading up to $19/bbl before softening a touch post window. Spreads saw buyside interest as well, with Aug/Sep trading up to $3.40/bbl, and E/W rallied to -$11.65/bbl with refiners on the buyside. EBOB cracks were mixed, opening at $31/bbl but got sold down to $30.40/bbl on weaker RBBR’s, with Aug/Sep valued at $47/mt.

This morning in naphtha, MOC better bid with +5c getting lifted by physical players in both Aug and Sep. E/W continues to rally higher, with July trading up from $33/mt to $35.50/mt end of window with lack of depth on the sell side this morning. E/W boxes pricing higher also, Aug/Sep implied $1.75/mt end of window with Dec/Jan getting lifted at $3/mt , bid on, with buying interest at $5.50/mt in the Q4/Q1 E/W box. Buyside interest in Q4/Q1 MOPJ flat price with buying in Sep/Jan MOPJ from small trade. Cracks strengthen with Aug MOPJ crack rallying from $0.75/bbl in the morning to $1.40/bbl end of window. In Europe, scale back selling of the prompt naphtha crack with Q1'26 trading -$6.90/bbl.

This morning in NGLs, there was some early CP flat price buying out of Aug and Sep at $506/mt and $492/mt, respectively. FEI spreads opened slightly stronger this morning and traded up into window, although following a physical bid getting hit, flat price and spreads came off. Aug/Dec FEI opened at $14/mt, traded up to $17/mt before coming off $2. Similarly, Aug/Sep traded up to $13/mt before eventually settling at $11/mt end window. Aug LST/FEI was initially weaker with the early FEI strength, trading down to $209/mt, but following the physical action it rallied back to -$204/mt by end of window. Aug FEI/CP traded at $73/mt before coming off to $70/mt end window, and there was also a Q4 buyer at $55/mt. End window on screen $575/mt was hit Aug FEI flat price.

* The USD continues to weaken from recent highs, as rate hike expectations are tempered. Chair Warsh made comments comments that inflation may not be as dramatic as feared and NFP data was weak yesterday. Treasury cash markets are closed for the July 4 holiday, but futures are firmer, with TYU6 around 109-21. Fed hike pricing has eased, with December 2026 pricing down to +30.8bp from +37.5 yesterday.

* The US added only 57k jobs in June, far below expectations of 110k. The previous two months were also revised down. The unemployment rate did fall to 4.2%, though this was driven by the labour-force participation drop to 61.5%, its lowest in over five years; there are signals workers are stepping out of the labour force. Consumer confidence remains fragile and real-wage growth is lagging behind recent inflation readings.

* JPY remains a key FX focus, with USD/JPY trading around 160.97 after a 160.49–161.52 Asia range, pressured by broader dollar weakness and renewed Japanese intervention jawboning. Officials again warned they can take “appropriate action” on FX at any time. The options board is important today because large expiries are clustered close to spot: $1.08bn at 160.00, $1.13bn at 160.50 and $1.36bn at 161.50 for the NY cut, with further large strikes on July 6 at 160.00, 160.50 and 161.75.

* Gold is the standout cross-asset mover. The weak NFP print has sidelined Fed hawks and revived demand for duration-sensitive assets, with gold now at $4,175/oz, up around 5.7% from Tuesday’s low. Buyers twice defended the $3,950 area after breaks below $4,000, and price is now testing the 20-day EMA at $4,174.

* Gilts are modestly softer in a bear-steepening move: 2Y 4.120%, 10Y 4.783%, 30Y 5.522%. The curve is positively sloped, with 2s10s near +66bp and 10s30s around +74bp. Long-end underperformance keeps fiscal/supply and term-premium concerns in focus despite softer global data.