Brent trades lower to $77 as US and Iran threaten further strikes

This morning Brent crude futures traded lower from the $79/bbl level and reversed some of yesterday’s gains, finding support around $77/bbl, printing $77.67/bbl at 10:30 BST. While the US military and IRGC both launched strikes for a second day, both sides have threatened further strikes but have not escalated beyond the current scope of military action. The market is interpreting this as such, with price action in Brent struggling to break above $80 and is down from yesterday’s highs. In the news, a fire broke out at a Tver oil base reservoir after Ukraine’s drone attack on the Tver Region northwest of Moscow, the region’s governor, Vitaly Korolev, said. On the night of July 9, drones again attacked two Russian tankers in the Taganrog Bay. Fires broke out aboard both vessels, acting Rostov Region Governor Yury Slyusar said. According to IMO secretary-general Arsenio Dominguez, about 6,000 seafarers remain trapped around the Strait of Hormuz. China’s independent refiners have stepped up purchases of Gulf crude over Iranian barrels, as widening discounts and improved supply availability strengthen the economics of Middle Eastern grades. Traffic through the Strait of Hormuz came to a near standstill on Thursday, where observable movements largely occurred along an Iran-approved route, while the US-supported Omani corridor was quiet. Finally, the Sep/Oct’26 and Sep/Mar’27 Brent futures spreads are at $0.55/bbl and $2.97/bbl respectively.

Quieter morning today following the volatility and stop outs yesterday. Opened a bit softer with Aug DFL trading back down to around -5c/bbl Dated to Lead having closed out around 10 last night. Saw some buying of 24-28 Jul 3-week roll, paying up to $0.36/bbl, and 27-31 Jul CFD trading $0.02/bbl in smalls. Further down the curve, we saw a trade and bank selling Q1'27 DFL down to $0.45/bbl, and some Cal'27 DFL selling down to $0.3/bbl.

A fairly uneventful morning on HSFO. Aug/Sep 380 traded between $2.25/mt and $2.50/mt in fairly decent size. 380 cracks in the front followed a fairly similar trend trading between -$7.00/bbl and -$6.80/bbl. 380 E/W was fairly illiquid in the front being implied with the 380 crack. The Aug 380 E/W was implied up to $15.50/mt. Barge crack largely unmoved trading around -$9.25/bbl which is where it closed last night. Barge spreads were implied a bit lower on lower crude with Aug/Sep barges down to $3.50/mt.

There was selling on Sing spreads early doors which saw the Aug/Sep Sing briefly trade down to $19.00/mt. However heading into the window there was axed buying on Sing flat price which lent support to the whole curve. Consequently Aug/Sep Sing traded up to $22.25/mt by the end of the morning. The Sing crack was well bid finishing up the first half of the day around $15.80/bbl. 0.5 E/W continued to be supported, as a result Euro 0.5 was stronger however not as strong as Sing 0.5. The Euro crack traded up to $6.20/bbl. Euro spreads were not as strong as Sing 0.5 with Aug/Sep trading around levels we saw last night of $20.00/mt.

This morning in distillates, Sing gasoil spreads opened higher before seeing selling in the front, with Aug/Sep trading up to $4.4/bbl coming back down to $4.0/bbl. Aug/Dec saw some buying interest post window, trading up to $16.75/bbl. EW saw buying early on, with Aug lifted up to -$67/mt on screen before selling off into and post window, trading down to -$74/mt last. Regrade remained bid in the front, with Aug at -$2/bbl, while kero spreads were offered.

Prompt ICE gasoil spreads sold off into the window before rallying post window, with Sep/Dec trading from $120/mt down to $107/mt, then back to $115/mt last, while cracks also weakened, with Sep moving from $59 down to $56.5/bbl. Heating oil spreads were rangebound, while HOGOs rallied, Aug HOGO swap from 31.0c/gal up to 32.7c/gal.

It was a volatile morning in gasoline. The east opened very weak, with cracks selling off from $17/bbl to lows of $15.50/bbl before recovering to $16.25/bbl post window. Spreads got offered down aggressively as well, as Aug/Sep traded down from $2.90/bbl to $2.40/bbl. EW was much weaker again, falling from -$15/bbl to -$16.20/bbl in Aug with EBOB remaining supported. Cracks firmed from $32.20/bbl to $32.40/bbl in Aug and Aug/Sep was bid at $59/mt.

This morning in Naphtha, MOC better bid with +5c getting lifted in Aug. EW initially better bid seeing Aug EW trade up to highs of $50.5/mt this morning, but then we see prompt EW and EW boxes sell off quite aggressively into window with the Europe crack and Europe spreads better bid, seeing selling interest in Oct and Nov EW with Aug trading down to $45.5/mt. Funds sell side of Sep/Oct Europe this morning at $14.5/mt, with Cal Nap crack getting lifted up to -$8/bbl this morning.

This morning in NGLs, Chinese came in as FEI flat price sellers out of Aug and Sep at $621/mt and $605/mt respectively. FEI was softer on the day with Aug/Sep trading down to $13/mt, having opened at $15/mt, and Sep/Oct was trading at $4/mt. On the back of FEI weakening, FEI/CP also priced down across the morning, with Sep trading down from $68.5/mt to eventually settle at $64/mt end window. CP spread interest in the front with Aug/Sep trading at $18/mt, down $1 from yesterday’s closing level. There was Butane/MOPJ buying this morning with Aug C4 ENT/MOPJ trading at -$267/mt, and Aug C4 CP/MOPJ lifted at -$139/mt. End window a physical cargo was lifted, but the market did not react in a significant way. Aug/Sep FEI traded up to trade at $15/mt, and the flat price was also stronger in Aug, trading at $624/mt. There was FEI/MOPJ buying out of Aug at -$86/mt post window, having been lifted at -$94/mt earlier in the morning. End window on screen, Aug FEI flat price was lifted at $622/mt.

17 minutes after the NYSE closes, the US strikes 80 targets in Iran; the strikes were 4 to 5 times larger than the round 10 days ago, per a US official.

With Brent up 6% from Friday’s close, we see the usual rotation in this US-Ian repeating cycle: equities lower (S&P futures -0.8%, Nasdaq -2.1%), yields higher (2-year & 10-year both 8bp higher), precious metals lower (gold -1.4% & silver -2.7%) and the dollar higher. Over 50% of Nasdaq stocks are now in a bear market, but until the Nasdaq composite breaks 25,000, longs will remain bullish.

Stocks are the most expensive ever, but trade the price, not the bearish narrative!

Elsewhere, the Kospi has broken support (officially a bear market!) down another 5.4% today after more circuit breakers (Bloomberg), and Japanese yields continue higher with 10s up another 3bp (highest since 1996).

AI compute prices remain weak just as data centre providers - already deeply unprofitable even at peak pricing - face pressure on margins, forcing a shift from subsidised subscriptions to token-based billing that reveals LLMs cost 10-20x more than customers were told. The IPO push from SpaceX, Anthropic, and OpenAI is a sign that these companies are racing ahead of a coming double hit of falling demand and shrinking margins.

Record Stock Concentration is not a healthy market. With market concentration so high and everybody in the same trades, the likelihood is greater that a significant drawdown will lead to a curbing of risk limits and further deleveraging. Banks would act as an accelerant as they supply a record amount of equity leverage to the market (to leveraged ETFs, for instance).

Amazon Sells Another $25BN Bonds As Goldman Urges Clients To Start Hedging AI Debt Bubble

Striking chart from the Chinese real estate market, showing that prices have collapsed to multi-decade lows.

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