Brent spread contango, and Iraq threatens to leave OPEC

Iraq has warned that it will consider all available options, including a potential exit from OPEC, if its oil production quota is not significantly increased, according to a senior Iraqi oil ministry official and other sources familiar with Iraqi oil policy. The move reflects mounting financial pressure from disruptions linked to the Iran war and the Strait of Hormuz, although Iraqi officials said the current preference is to remain in OPEC while seeking a higher production quota. China's state-owned refiners, including Sinopec and PetroChina, are evaluating whether to resume Iranian oil imports following a new US waiver allowing purchases, according to several industry sources and officials at Chinese state oil companies. However, ample alternative supplies, financing and shipping uncertainties, and weak domestic fuel demand are limiting enthusiasm, with state oil officials saying independent Chinese “teapot” refiners are likely to remain Iran's primary customers. A Liberian-flagged oil tanker departing the UAE and heading towards Oman successfully transited the Strait of Hormuz using a new UN-backed route near Oman's coast despite explicit threats from Iran's Revolutionary Guard, which declared the route "unacceptable" and warned that vessels using any route not approved by Iran would be considered in violation and could be "dealt with". In India, the Government has withdrawn restrictions on commercial LPG supplies and restored availability to pre-crisis levels following a review of measures introduced during the recent West Asia crisis. Finally, the Aug/Sep’26 and Aug/Feb’27 Brent futures spreads are at -$0.23/bbl and $1.12/bbl, respectively.

This morning in Brent/Dubai we gapped lower, the July bd opening down 40c and trading from $7.10/bbl down to $6.82/bbl. There was bank and products selling of Brent/Dubai in the front. There was some trade house buying of Q4 Brent/Dubai around $1.85/bbl and the Cal 27 remained well bid. The Dubai spreads traded rangebound, between -$1.15/bbl to -$1.07/bbl. The boxes were better offered, trade house selling the Aug/Sep spread down from $1.36/bbl to $1.31/bbl. There was continued bank buying of Dec/Feb Brent/Dubai boxes.

VLSFO was characterised by strength this morning. Initially there was selling on Sing cracks however that got taken out fairly quickly and cracks in both regions went bid. The Euro crack traded up to $8.75/bbl from overnight levels of $8.45/bbl. While the Sing crack closed the morning at $14.35/bbl from yesterdays close of $13.75/bbl. Spreads were also stronger, Jul/Aug Sing traded up to $20.00/mt and Jul/Aug Euro briefly touched $28.00/mt

380 spreads were better bid to start the morning off. However it we saw little price action as a result. Jul/Aug 380 traded up to $0.00/mt from -$0.25/mt. However the 380 crack was a beneficiary of HSFO strength, trading up to -$7.10/bbl from -$7.75/bbl. 380 E/W also traded up a couple ticks to $9.25/mt from $8.75/mt. Barge spreads caught a bid with Jul/Aug closing the morning at $1.25/mt from -$0.25/mt levels seen last night. As expected, the barge crack also firmed up, closing the morning at -$8.65/bbl from -$9.10/bbl.

This morning in distillates, Sing gasoil was scale back offered on spreads with ICE strength. Front E/W had initial buying by paper which got sold into but then lifted and bid over on screen. It then got sold into and came off from -$44/mt to -$47/mt. Regrade was bid by real but getting sold into, dropping from -$0.85/bbl to -$1.20/bbl. Kero spreads have remained sellside with Aug/Nov trading at $5.20/bbl then stepping down to $5/bbl on lower ICE.

Prompt ICE gasoil opened slightly higher and saw continued strength, rallying further up to $23.50/mt in Jul/Aug. Aug cracks saw similar strength, reaching $45.20/bbl end window then selling off aggressively back down to $43.50/bbl. European jet diffs saw more weakness, dropping a further $2/mt to $55.50/mt. Heating oil spreads were stronger into the morning window while the M1 HOGO swap was volatile but sold off down to 31.1c/gal before firming to 31.8c/gal.

This morning in gasoline, flat price traded end window at $92.95/bbl with MOC better bid. Gasoline rallied on stronger RBBRs, with Jul 92 cracks seeing scaleback selling from $19.40/bbl up to $20.30/bbl. Spreads saw mixed interest as Jul/Aug firmed from $3.90/bbl to $4.30/bbl. E/W continued to come off, trading down from -$10.10/bbl to -$10.60/bbl as EBOB went bid. EBOB cracks got lifted from $29.80/bbl to highs of $31.10/bbl and Jul/Aug traded up from $29/mt to $32/mt.

This morning in Naphtha, mixed interest in MOC with July MOC trading between -5 and +5c, with physical players buyside. E/W trails higher this morning, trading up from $28/mt to $29.50/mt in July end of window with real sell side interest from refiners in Aug E/W. Cracks higher in both regions going better bid into end of the window seeing July MOPJ crack trade up to -$1.50/bbl up from yesterdays trading level of -$2.60/bbl. Trade buyside of July Nap crack -$4.50/bbl, with Cal Nap crack getting lifted at -$8.65/bbl. Crack rolls and higher this morning also, seeing July/Dec Nap flat price spread getting lifted $23.50/mt.

This morning in NGLs, there was some early Chinese FEI flat price buying out of Aug at $538/mt. Following the announcement of a Force Majeure at Energy Transfer GC NGL, FEI flat price and spreads began to gap up, seeing July/Aug get lifted at $9/mt, compared to the opening traded level of $5/mt, and July flat price traded up to $552/mt having opened at $543/mt. As a result, LST/FEI weakened down to -$190/mt before hedger buying flow came in to strengthen the arb back to trading at -$178/mt. This hedging flow outweighed the impact of the Force Majeure, and consequently, FEI flat price and spreads came back off, with Jul/Aug trading back down to $6/mt. Also had Dec 26/Dec27 and Dec27/Dec28 FEI buying at $40/mt and $30/mt respectively, with the prior weakening to $36.50/mt post window. The Jul FEI/CP traded at -$30/mt, down from last night’s close of -$25.50/mt, before eventually strengthening slightly to close at -$28/mt. On screen end window, Jul FEI flat price was hit at $543/mt.

* The long-term rise in 2-year real yields is driving the dollar higher. EURUSD, gold and silver have all broken key support. Having said that the U.S. 10-year bond yield finally broke lower yesterday, down 10bp finally in reaction to the crude fall and plummeting inflation expectations.

* Micron reported Q3 FY2026 revenue of $41.5B, crushing the $35.6B Street estimate, with revenue up 364% year-on-year versus expectations of 286%. Gross margins hit 84.9% against an 81.9% consensus — extraordinary for a hardware company. Q4 guidance of $49–51B revenue and ~86% gross margin again blew past Street estimates of $43.2B and 83.6% respectively. The structural story is the real headline: management flagged tight memory supply persisting beyond 2027, and has locked roughly half of future revenue into binding multi-year contracts. For context, Nvidia's blockbuster print about a year ago was $35.1B revenue and $19.3B net income; Micron just did $41.5B and $28.2B, guiding to $50B next quarter. After 40 years of brutal cyclicality, AI has turned memory — historically the worst business in tech — into one of the most profitable hardware franchises on earth, because datacentres cannot run without HBM and there isn't enough of it. Micron rallied 13% after hours.

* Financial stress dropped to one of the lowest readings of the last 10 years. The STLFSI is the St. Louis Fed Financial Stress Index, developed by the Federal Reserve Bank of St. Louis.It is one of the most widely followed indicators of financial market stress in the U.S. and globally.

* Foreign holdings of US equities jumped +$2.0 trillion in April, to a record $23.2 trillion. This figure has more than DOUBLED since the 2022 bear market.

* With Bitcoin at $60,000, MicroStrategy, falls to its lowest level since February 2024, now down -83% from its record high.