Brent sells off from nearly $109/bbl alongside minimal damage to E/W pipeline

In the news, US diesel prices have surpassed the $6/gal mark for the first time in history, according to AAA gas price data. In other news, the Yemen-based Houthis have reportedly taken control of Perim Island in the Red Sea. The island divides the Bab al-Mandeb Strait, potentially giving the Houthis more control over the waterway. This follows a day after the Houthis seized the Red Sea port city of Mokha from Saudi-backed pro-government forces. An AFP report said that Saudi Arabia has conducted two airstrikes on Mokha airport. Meanwhile, satellite imagery indicates a direct strike on Saudi Arabia's E/W pipeline by the Houthis, although The Officials' trade sources have maintained that damage to the pipeline is minimal. The IEA expects total supply to fall by 5.7mb/d to 100.7 mb/d in 2026, citing a delayed return of normal Persian Gulf flows, which the organisation expects will be delayed until 2027. In China, the nation has capped increases in retail prices for transportation fuels for the third time since the start of the US-Iran war in March 2026. Retail prices for gasoline and diesel will rise by 260 yuan ($38.76) and 250 yuan per mt, effective from 12 Sep. Under normal pricing mechanisms, these increases would have been 435 yuan and 420 yuan, respectively. Finally, at the time of writing, the Nov/Dec'26 and Nov/May'27 Brent futures spreads stand at $4.60/bbl and $19.60/bbl, respectively.

Better offered in Dated this morning, with Balmo DFL off a dollar, sold at $11.00/bbl by a major. Oct/Nov saw selling from $1.85/bbl to $1.70/bbl on the DFL roll, with the Dated roll now implied around $5.65/bbl. In the deferred, Mar/Apr and Apr/may saw buy-side interest alongside Q1 DFL.

This morning in Brent/Dubai, we initially gapped lower in Oct Brent/Dubai, but Dubai spreads sold off sharply, and we rallied from -$1.40/bbl in Oct Brent/Dubai to -$0.50/bbl, with refiners buying at the highs. There was product selling in the Oct/Nov Dubai spread all the way down from $6.5/bbl to $6/bbl. There was also fund buying of the Oct/Nov Brent/Dubai box from -$2/bbl to -$1.75/bbl. Brent/Dubai boxes initially traded lower, but reversed with selling in Dubai spreads. Quarterlies continue to be very quiet OTC.

In VLSFO, the 0.5 market was stronger this morning. Sing 0.5 spreads opened higher, with Oct/Nov opening at $42.50/mt before instantly getting bid up to $44.50/mt. It then shed 50c and traded at $44.00/mt for the majority of the morning; the other Sing 0.5 spreads were relatively thin this morning. Oct Sing cracks opened around a dollar higher at $20.20/bbl, and there was decent volume traded both OTC and on screen, but price action was relatively muted; it traded up to $20.50/bbl by window end, and then sold back down to $20.30/bbl. Oct/Nov Euro 0.5 opened higher at $18.50/mt; it briefly traded up to $19.00/mt before selling back down to $18.50/mt. Oct Euro crack traded slightly higher than yesterday's close, trading between $2.80/bbl and $3.00/bbl, 0.5 E/W has therefore been implied higher at $110.00/mt.

In HSFO, Sing 380 spreads opened much higher this morning; Oct/Nov opened around 7 dollars higher at $42.00/mt before selling back down to $38.00/mt, where it found support and traded for the majority of the morning. Nov/Dec saw good volume this morning, and price action was similar to Oct/Nov, initially opening higher at $29.75/mt before selling back down to $28.50/mt. Oct 380 crack traded between -$2.30/bbl and -$2.10/bbl before selling down to -$2.60/bbl post window. 3.5% barge spreads were thin this afternoon, with Oct/Nov trading around $17.50/mt while the Oct crack traded at -$12.60/bbl.

This morning in distillates, Sing gasoil spreads were well bid, with stop-outs taking Oct/Nov traded from $10.25/bbl up to $11.30/bbl, while Dec/Jan was paid up to $7.70/bbl. The gasoil E/W was well bid in Q1’27, lifted up to -$65.25/mt, while Oct E/W traded up to -$48/mt before selling down to -$65/mt post-window. Regrade roofed initially before selling off, with Dec trading from $6.50/bbl up to highs of $9.50/bbl, now hit down to $6/bbl last.

Prompt ICE gasoil spreads sold off overall, with Oct/Nov trading from $87.50/mt down to $85.00/mt, while Nov cracks sold down from highs of $83.00/bbl to $81.90/bbl.

In gasoline, Sing 92 MOC was better offered this morning. The East started the morning very well bid, with Oct’26 cracks rallying from $29/bbl to $31/bbl before getting sold back down to $29/bbl. 92 spreads followed a similar pattern, with Oct/Nov getting bid up from $10.50/bbl to $11.75/bbl and then coming off to $10.25/bbl. Oct E/W fell from highs of -$4/bbl to -$5.80/bbl. EBOB cracks rallied over a dollar before softening to $34.40/bbl, and Oct/Nov EBOB opened at $97/mt before finding sell-side interest at that level.

This morning, naphtha was very strong, with MOPJ MOC better bid and 92/MOPJ selling flows supporting the east, as E/W, front MOPJ cracks and NWE Oct cracks all went bid. MOPJ cracks were stronger versus last night, with Oct bid aggressively, trading at $2.70/bbl and implying closer to $3.70/bbl off flat price selling, while Q2 was around -$2.3/bbl; spreads were bid early before coming off into the end of the window, with Oct/Nov up to $44/mt before easing to $40/mt, Nov/Dec from $41.50/mt to $40.50/mt and Dec/Jan around $30.50/mt. E/W rallied sharply, with Oct up to $67.50/mt before retracing to $66/mt post-window; the Oct/Dec box at $6/mt and the backend still bid but illiquid, with the Q1/2 box trading at $10.50/mt. NWE naphtha was also strongly bid as Oct cracks flew to -$3.25/bbl early before easing to -$3.90/bbl in low liquidity as backend cracks went bid, with Q1 around -$4.70/bbl and Q1/Q2 around $1.90/bbl; spreads were supported and crude-dependent, with Oct/Dec up to $81.50/mt before coming off to $74.50/mt, Dec/Jan at $24.50/mt and Jun/Dec 27 at $41.50/mt.

This morning in NGLs, FEI initially saw selling from DCE before finding a bid once that selling was absorbed. Once again, the main drivers of FEI strength were FEI/CP buying and scale-back bids in CP. FEI FP ended the window at $850/mt, with Oct/Nov trading at $36/mt and Nov/Dec at $30/mt. FEI/CP was bid across the curve, with Oct trading up to $220/mt and Nov at $199/mt. CP was sold into once again, with FP trading down from $643/mt to $628/mt post-window. C3 E/W was relatively balanced, with Oct trading at $204/mt and the Euro arb at -$198/mt. There was buy-side interest in the arb again, and when FEI weakened post-window, arb buyers stepped up, with Oct trading at -$400/mt.

As Brent spikes briefly, touching $110, on news that the Houthis strike Saudi’s E/W pipeline and PPI inflation is up to +5.4%, U.S. 2-, 10-, and 30-year yields surge to cycle highs (up 15, 12 and 7 bp on the day, respectively). Global yields follow, with UK 2yrs also jumping 15bp. The S&P 500 closed marginally lower -0.6% and just below a key support at 5,792, and after the ECB hike 25bp yesterday the OIS prices a 100% change of a Fed hike by the 28th October meeting, and 50bp by 27th Jan. For credibility Warsh and the Fed should hike now.

CPI comes out today. Note PPI data was taken the week of 13th August, so doesn’t include the recent surge in energy. Also note CPI typically lags PPI by about 3 months.

Correlation between yields and oil is now higher than in 2008.

The Bloomberg Commodity Index has surged to its highest level in over a decade. It's risen by a stunning 32% YTD. While global coal demand will rise to a record high of ~8.94 billion metric tons in 2026 (up ~1.2% from 2025), according to new estimates.

The Breakwave Tanker Shipping ETF ($BWET), which tracks crude oil tanker freight rates, has surged 6,200% in the past 15 months after the Strait of Hormuz effectively closed in February 2026 - yet despite assets growing from $3 million to $157 million, it remains one of the most overlooked trades of the cycle

US diesel prices officially rose above $6.00/gallon for the first time in history, now up +74% over the last 9 months.

U.S. housing inventory is completely lopsided. Sellers outnumber buyers by 563,000, a historic 58% gap. This will only get wider for now with rates market events.