OIL: Mixed Physical Crude Indicators Despite Advancing Flat Price: Sparta

Short-term indicators in the physical crude market remain mixed despite the advance in flat price due to geopolitics, elections, expectations of supportive Q3 crude balances and the predicted active hurricane season, according to Sparta Commodities.

• WTI continues to land cheaply in NW Europe relative to North Sea BFOET grades, even on Aframax cargoes, helping to support substantial WTI flows to Europe.
• Brent-linked crudes are looking very expensive in Asia relative to Murban.
• North Sea strength could be an indicator for Q3 demand, but the strength isn’t aligned with other areas of the physical market.

• North Sea crude premiums will need to decline unless some strong localized buying of light sweet supply in Europe emerges.

• Relative strength in ICE timespreads has pushed the Brent-Dubai EFS back above the $2/bbl.
• A correction could be expected in West African differentials with another developing overhang of July cargoes, a wider EFS and relatively expensive landed values into NW Europe.
• Margins for heavier WAF grades, such as Bonny, look relatively healthy versus WTI due to better middle distillate yields.