Brent Stable As War Risk Priced In

This morning the Sep’26 Brent crude futures traded slightly lower from the $85 to $84/bbl level, with prices consolidating here throughout the morning. Since 14 July, prices have been trending between the $83.50 and $87.50/bbl range. The US and Iran traded strikes overnight, with explosions reported in northern Iran for the first time since the recent escalation, while Iran has claimed retaliatory missile and drone attacks on US military facilities in Bahrain, Kuwait, and Jordan. In the news, the US military has hit the US-sanctioned supertanker Belma near Kharg Island, its first attack on a vessel since it reimposed its blockade of the country’s shipping. United Airlines said on Wednesday it expected nearly $6 billion in additional fuel expense this year compared to estimates at the start of 2026 but still raised the low end of its full-year profit forecast, betting strong travel demand, higher fares and capacity cuts will help it absorb the fuel shock. India raised taxes on exports of diesel and jet fuel following renewed Middle Eastern hostilities, increasing to 15.5 and 14.5 rupees a litre, respectively. TotalEnergies said higher energy prices due to the war in Iran are expected to lift its Q2 profits, though LNG income will be sharply down due to weak trading on declining European demand, according to an earnings snapshot published on Thursday. Finally, the Sep/Oct’26 and Sep/Mar’27 Brent futures spreads are at $1.34/bbl and $5.99/bbl respectively.

Very quiet morning in Dated. We saw some buying of Bal Jul/Aug Dated at -$0.32/bbl buying of 27-31 Jul 3-week at $0/bbl. We also saw continued buy side interest in 28-4 Sep v Cal Sep and 1-9 Sep v Cal Sep, as well as 22-28 Jul vs 29-04 Aug. However saw selling out of 20-24 Jul DBL, 27-31 Jul 1-week at -$0.35/bbl and Cal Aug v 17-21 Aug. Further down the curve we saw some Oct DFL buying and paper on both sides on Q1'27 DFL.

This morning in Brent Dubai we traded higher in the Aug, which accelerated as the Dubai partials window was very weak. We traded up from $5.1/bbl to highs of $6.3/bbl. Liquidity was very thin, and during this time we saw the Aug/Sep spread trade down from $0.8/bbl to $0/bbl, before some buying came in and we rallied to $0.27/bbl. Towards the lows there was buying of spreads in smalls by fund, Aug through Nov spreads. There was also some bank selling of Q4 B/D around $3.54/bbl. The boxes all moved higher as we rallied in B/D, the Aug/Sep box up from $0.5/bbl to $1/bbl.

380 was a lot weaker this morning with a fair amount of selling coming in on spreads. Aug/Sep 380 traded down to $10.00/mt from $15.00/mt although liquidity was lower today relative to previous days. The 380 crack came off as a result trading down to $4.50/bbl from -$2.50/bbl. 380 E/W was also weaker as a result which closed the morning down to $25.00/mt from $33.00/mt. Barges were largely illiquid today, barge crack was a touch lower off the back of 380 weakness trading down to -$8.50/bbl while Aug/Sep barges was implied down to $5.75/mt.

Sing 0.5 started the morning off stronger. Aug/Sep gapped up to $41.00/mt from $38.00/mt on very low liquidity. The Sing crack got bid up as a result reaching a peak of $20.50/bbl before the whole complex came off in the window. Spreads turned offered with the front trading back down to where we closed it last night of $38.00/mt. Sing cracks followed suit with Aug closing out the morning around $19.00/bbl. Euro 0.5 lacked liquidity this morning the Euro crack largely moved around with Sing 0.5 closing the morning a touch lower relative to yesterdays close around $7.20/bbl from $7.60/bbl. Aug/Sep Euro was a touch weaker on lower cracks trading down to $21.25/mt from $22.25/mt.

This morning in distillates, Sing gasoil spreads were mixed overall, with the weight on the sell side in Aug/Sep, trading from $6.35 down to $6.1/bbl into end window. EW sold off overall, with Aug hit from -$70 down to -$72.5 before finding some buying and trading back up to -$69.5/mt, then coming back off to -$71/mt into the end window. Aug regrade weakened on kero spread and MOC selling, from $0 down to -$0.35/bbl.

ICE gasoil spreads firmed at first before coming off slightly, Sep/Dec from $140 up to $148.5/mt, then weakening to $146.75/mt while Sep futures cracks ripped to $63.0/bbl. Euro jet weakened in the front, with Aug trading from $105 down to $95/mt, while Q1'27 traded at $100/mt.

It was a strong morning in gasoline as 92 cracks rallied from $20.10/bbl to $20.50/bbl in Aug. Spreads opened better offered with Aug/Sep selling around 4.65/bbl but remained balanced during the window. EW came off from -$14.20/bbl to -$15.70/bbl with EBOB ripping: cracks rallied from $35.25/bbl to $36.30/bbl and Q4 was bid at $15.30/bbl. Spreads opened with strong buyside interest as well, with Aug/Sep trading at $73/mt and got lifted to $75/mt.

This morning in Naphtha, MOC better offered in both Aug and Sep , with Japanese trade house selling -5c in Sep for size. EW and prompt cracks get sold down, seeing EW in Aug come off to $43/mt, down $7/mt from where it closed last night. EW finds a floor with buying in Sep EW at $39.5/mt from refiners. Aug crack trades down from $3.7/bbl this morning to $1.95/bbl end of window, with scale back selling in Aug/Oct crack roll. Banks sell side of Cal 27 crack at -$5.85/bbl. In Europe, prompt crack trades down from -$2.5/bbl to -$2.9/bbl this morning but recovers slightly into end of window valued at -$2.75/bbl.

This morning in NGLs, Chinese came in on the buyside of FEI flat price in Sep and Oct, trading at $642/mt and $635/mt respectively. Aug/Sep FEI was bid up to start the day, trading up from $19.5/mt to $25/mt, and in turn flat price came up with it. Sep/Oct was also up on the morning, reaching a trading level of $13/mt, having closed yesterday at $7.50/mt. Aug LST/FEI came off as FEI flat price strengthened, trading down to $282/mt, before rebounding to print -$274/mt end window. Aug FEI/MOPJ was also stronger on the day, having initially opened trading at -$105/mt, to eventually settling at -$86/mt. There was some CP spread interest today, with Aug/Sep trading at $32/mt and $30/mt, and Aug/Oct getting hit at $42/mt. End window on screen, Aug FEI flat price was lifted at $672.5/mt.

* CALM ON THE SURFACE, ROTATION UNDERNEATH
* The NASDAQ 100 fell 0.8% after Fed Chair Kevin Warsh questioned AI spending, with memory and AI stocks hit hardest. Warsh called the infrastructure buildout impressive but flagged early overcapacity signs, especially in memory chips - his worry is that investment is outpacing monetization, and not every AI project will justify its priced-in returns.
* The pressure isn't confined to the US. South Korea's central bank raised rates for the first time in over 3 years, and the KOSPI fell another 7%.
* Yet the broader macro picture looks constructive. PPI came in cooler than expected - 5.5% YoY vs 6.2% expected, down 0.3% MoM vs flat expectations. The S&P 500 is closing in on new all-time highs and global investors have turned their most bullish since February, per BofA's latest survey
* Here's the disconnect: while the index looks calm, momentum is unwinding at a historic pace beneath it. Goldman Sachs' High-Beta Momentum Index is down 24% month-to-date through the first half of July, its worst stretch since April 2009. Morgan Stanley's Tech Momentum Index has fallen 35% over just 17 days, the sharpest drop in its 27-year history
* Buffett's take on where this lands, in three points:
• No bubble in computing power. MSFT, AMZN, Meta, and SPCX should see soaring profits and valuations as demand for compute keeps outstripping supply.
• Open-source models will hurt OpenAI and Anthropic, as cheaper alternatives from China and elsewhere erode the moat around paid AI services.
• Enterprise AI spending is unsustainable. Companies aren't controlling API token costs, making a pullback inevitable.
* The market's plumbing is shifting too. Leveraged ETFs have hit a record 700 US-listed products, more than double the count at the end of 2024, with 400+ tied to individual stocks. Position sizing matters more than ever. Stock correlations to the S&P are at historical lows and sell-offs are increasingly selective: over the last 20 S&P 500 down days, an average of 239 stocks still finished positive, the highest reading on record, triple 2022 bear market levels.