Crude
Market Overview
Crude: MOU
US crude inventories have continued to decline throughout the SPR releases since the end of March.
Cushing has drawn particularly hard, hitting near minimum workable levels as US refiners served as the "barrel of last resort" during the crisis.
The key question is how flows resume post-MoU: will the agreement hold, and what does this mean for US export flows?
A full resumption of flows from the Strait of Hormuz within the next week is highly improbable. Significant capacity remains offline despite cargoes effectively serving as floating storage.
Crude: USGC light sweets still looking sweet to the Far East
Critically for US inventories in coming weeks, WTI remains competitive into NWE.
Despite declines in outright cracks, refinery margins remain broadly strong for refiners taking WTI.
A true recovery in products is likely to follow improved crude flows from the Strait. Demand from Europe for US volumes in the interim is set to remain strong.
WTI landed on an Aframax remains widely competitive into the basket, current pricing at a discount to Ekofisk of -$3.34/bbl.
Crude: US crude
Unlike Europe, WTI landed values into the Far East are broadly unattractive.
Refinery margins across prompt September windows remain positive for all complexities in the region.
With more Murban potentially supplying the Far East, WTI is pricing at an expensive $6.56/bbl premium landed, broadly keeping it out of the region.
Given draws on China's SPR, these releases were arguably the primary driver of global energy stability as the crisis worsened.
Against current inventory levels, crude prices look highly discounted and may prompt a bullish period as demand recovers with lower pricing and greater availability.
