Conflict, uncertainty and CPC disruptions lead to a choppy Brent

In the news, Egypt confirmed Wednesday's fire on two gas vessels at the Mediterranean port of Damietta was caused by a drone attack rather than an accident. No party has claimed responsibility for the attack yet, with the Egyptian cabinet continuing its investigation. The two impacted LNG vessels appear to be the 138,000 cu m Energos Winter floating storage and regasification unit (FSRU) and the 155,000 cu m Gaslog Salem floating storage unit. In other news, the Caspian Pipeline Consortium (CPC) has suspended oil loadings, as per a Telegram statement, although its pipeline facilities are operating normally. The decision follows further attacks on oil tankers, one of which was targeted while loading oil at the CPC's single-point mooring in its marine terminal in Novorossiysk. The other was attacked six nautical miles from the CPC's marine terminal while it was on its way to receive oil. Saudi Arabia's economy contracted by 4.8% y/y in Q2 2026 (Q1: +3%), making its first decline since Q4 2023 and its deepest quarterly contraction since COVID-19, driven by a sharp downturn in its oil activity, which dropped 24.7% y/y. Finally, at the time of writing, the Oct/Nov'26 and Oct/Apr'27 Brent futures spreads stand at $3.30/bbl and $10.10/bbl, respectively.

This morning in Dated Brent, we saw a strong rally in Aug DFL following the CPC news. Aug CFD traded up to highs of $5.09/bbl with Singaporean players buying before Chinese players sold into Aug/Sep Dated Brent aggressively down to $4.20/bbl, dragging Aug DFL back down. We saw selling of 30-5 Aug vs Oct ICE Brent down to $5.60/bbl and buying of 3-14 Aug vs 17-28 Aug at $2.20/bbl. Also had selling of 17-21 Aug one-week at $1.10/bbl.

A very strong start to the day on VLSFO. Sing cracks traded up to $26.00/bbl in a $3 move. Sing spreads were supported by crack strength as well as higher crude, which saw Aug/Sep Sing trade up to $61.75/mt. Euro cracks were stronger off the back of Sing strength however, the Euro crack was fundamentally weaker. Euro cracks in August traded up to $9.90/bbl while Aug/Sep Euro traded down to $32.25/mt.

In HSFO, 380 spreads and E/W were stronger on bullish sentiment in the market. Aug/Sep 380 traded up to $23.75/mt while the 380 E/W got as high as $60.00/mt. Barges continued to be weak with the barge crack trading down to -$10.75/bbl while Aug/Sep barges remained range-bound around $8.25/mt.

This morning in distillates, Sing gasoil spreads saw physical buying initially before trading lower on lower ICE gasoil, with Sep/Oct trading from $9.70/bbl down to $9.55/bbl. The gasoil E/W was mixed, trading range-bound between -$73/mt and -$71.50/mt, while Q1 held at -$56/mt. Regrade sold off aggressively in Sep before finding buying at $1.00/bbl.

Prompt ICE gasoil spreads weakened, with Sep/Dec trading from highs of $208/mt down to $203/mt last, while front cracks sold off from $74.10/bbl down to $72.10/bbl. Heating oil spreads were range-bound, while HOGOs strengthened, with the Aug HOGO swap trading from lows of 17.10c/gal up to 19.10c/gal.

This morning, gasoline was mixed, as RBBRs weakened overnight. 92 cracks opened a dollar lower than last night’s close at $27/bbl but rallied to $27.50/bbl. Spreads also opened up better bid, with Aug/Sep trading up to $8/bbl before softening to $7.75/bbl during the window. The gasoline E/W opened strong at -$9.50/bbl but got sold down to -$10/bbl as EBOB recovered. EBOB cracks firmed from $36.45/bbl to $37.35/bbl on good arb selling, and Q4 has continued to move up, trading at $19.50/bbl. Front spreads initially went better offered, with Aug/Sep getting sold down to $68/mt, before trading back up to 70.50/mt.

This morning in Naphtha, a relatively quiet morning with respect to MOPJ MOC, seeing Sep MOC slightly better offered with some buying in Aug MOPJ MOC. Selling interest in Oct E/W during the window at $40/mt, seeing Aug E/W trading $44/mt at the end of the window. Aug/Sep MOPJ crack roll pricing lower this morning, with Aug/Sep MOPJ flat price spread better offered on higher crude in the morning.

This morning in NGLs, the CP settle was released with C3 CP at $620/mt and C4 CP at $640/mt. FEI spreads initially opened stronger than yesterday’s close, but sold off across the morning. Aug/Sep FEI opened trading at $40/mt, before weakening to $37/mt, and Sep/Oct weakened $1, having traded at $27/mt. There was some Q4 LST/FEI selling at -$242/mt, which eventually strengthened to print -$248/mt at the end of the window as FEI flat price was weaker into the close. Aug LST/FEI traded at -$337/mt, $1 stronger than last night’s closing level. End window on screen, Aug FEI flat price was lifted at $716/mt.

Kevin Warsh’s first FOMC as Fed Chair received a blunt verdict from the bond market: hawkish language without action is losing credibility. After the Fed held rates unchanged for a seventh consecutive month, 30-year Treasury yields jumped as much as 14 basis points to nearly 5.23%, a 19-year high. They extended the move higher into today. The 10-year yield climbed one basis point to 4.71%, reaching its highest level since January 2025.

OIS pricing of the next 12 months has dropped from around 26 bps of cuts before the meeting to 16 bps. Fewer cuts expected – but Trump praised Warsh!

Short-dated yields fell as investors reduced expectations for an immediate increase, while long-dated yields rose on inflation concerns. The resulting two-year/30-year steepening was among the largest after a Fed meeting since the mid-1990s.

The Fed kept its benchmark range at 3.5%–3.75%, unchanged since December, despite CPI inflation running at 3.5% against a 2% target and remaining above target for five straight years. Three officials dissented in favour of a hike.

Warsh, appointed Chair two months ago, argued that rising long-term rates are already tightening conditions. Markets instead interpreted the decision as delay. The reaction spread abroad: Germany’s 30-year Bund yield reached 3.687%, while the 10-year rose 3.2 basis points to 3.188%. Higher long-term borrowing costs risk tightening financial conditions without restoring Fed inflation credibility.

Big tech earnings were mixed; Microsoft beat EPS expectations, while Meta missed. Microsoft shares jumped nearly 7% overnight. The Kospi crash continues – the Korean index is now down more than 40% from its 19 June high.

Data today: Euro area GDP, Bank of England rate decision, US PCE and GDP