5.1 Crude/Brent
Synthesis
The global crude oil market is currently navigating a highly volatile and complex landscape defined by acute geopolitical tensions, significant inventory shifts, and deeply divided analyst forecasts. Prices have surged to multi-month highs, with West Texas Intermediate (WTI) closing at a six-month high of $66.43 per barrel and April Brent reaching $71.68 per barrel, driven primarily by escalating fears of a military conflict between the United States and Iran [Argus]. The Trump Administration has aggressively repositioned naval and air force assets, including moving the USS Gerald Ford aircraft carrier strike group toward the Mediterranean, sharply elevating the geopolitical risk premium as traders fear potential disruptions to the critical Strait of Hormuz [Argus]. However, J.P. Morgan (JPM) offers a starkly contrasting view to the prevailing bullish market sentiment observed at the recent International Energy Week in London [JPM]. While market bulls point to potential Russian output cuts, rising US-Iran conflict risks, low visible OECD inventories, and a macro rotation into commodities, JPM vehemently disagrees [JPM]. JPM argues that the recent price strength is entirely driven by temporary supply disruptions and geopolitics, maintaining that the Middle East risk premium is overstated because any US military action is likely to be surgical and avoid Iranian oil infrastructure to prevent severe economic blowback ahead of midterm elections [JPM]. Furthermore, JPM anticipates a sizable oil surplus in 2026, projecting that production cuts of 2 million barrels per day will be needed to prevent excessive inventory accumulation in 2027 [JPM].
Adding another layer of complexity, Goldman Sachs (GS) highlights that global oil prices have remained supported despite a global surplus because much of this excess has materialized as rising inventories of sanctioned crude that are "stuck at sea" [GS]. GS estimates that 375 million barrels of crude from Russia, Iran, and Venezuela are currently on water, accounting for a third of global visible crude year-over-year builds [GS]. Meanwhile, physical market fundamentals in the US provided strong bullish momentum, as the Energy Information Administration (EIA) reported a massive 9 million barrel draw in US crude inventories, pushing stocks down to 419.8 million barrels [Argus]. This significant draw, coupled with US crude exports hitting a two-month high of 4.6 million barrels per day, underscores a tightening domestic balance that is exacerbating the geopolitically driven price rally [Platts].
Key Themes
Geopolitical Risk Premium: The escalating tensions between the US and Iran are currently the dominant force driving crude prices higher, with the market pricing in a significant risk of supply disruption from the Middle East [Argus]. However, institutions like JPM believe this premium is unwarranted and expect a diplomatic resolution or limited strikes that spare oil infrastructure [JPM].
Diverging Analyst Views: There is a stark contrast between the bullish sentiment of market participants (who foresee Russian cuts and macro inflows) and the bearish structural outlook of banks like JPM, which forecasts a persistent supply surplus and dismisses the likelihood of forced Russian production cuts [JPM].
Sanctioned Barrels on Water: The dynamics of the "dark fleet" are artificially tightening visible inventories. As noted by GS, the massive accumulation of 375 million barrels of Russian, Iranian, and Venezuelan crude stuck at sea is masking the true extent of the global supply surplus and distorting pricing signals [GS].
US Inventory Dynamics: The massive 9 million barrel draw in US crude inventories reported by the EIA has provided fundamental justification for the recent price rally, highlighting robust export demand and steady refinery utilization despite broader macro concerns [Argus].
Key Market Drivers:
US-Iran Military Posturing: The deployment of the USS Gerald Ford and heightened rhetoric from the Trump Administration are forcing traders to heavily discount the possibility of supply disruptions from the Persian Gulf [Argus].
JPM's Bearish Rebuttal: JPM's insistence that Russian production will remain resilient at 9.5 million barrels per day and that global inventories built by 1.5 million barrels per day in 2025 challenges the bullish narrative and sets a lower bound for fair value expectations [JPM].
EIA Inventory Data: The unexpected and massive 9 million barrel draw in commercial crude stocks, combined with a 1.1 million barrel drop at the Cushing hub, has tightened physical differentials and supported flat prices [Argus].
Export Economics: US crude exports surging to a two-month high of 4.6 million barrels per day indicates strong international demand for US light sweet crude, providing a floor for WTI pricing on the Gulf Coast [Platts].
Macro Rotation: While some bulls cite a rotation from tech equities into commodities as a price driver, JPM notes that the $5 billion in year-to-date inflows into commodity indices is insufficient to dictate oil price direction independently [JPM].
Supply/Demand Fundamentals:
US Crude Stocks: EIA data showed commercial crude inventories plummeted by 9 million barrels to 419.8 million barrels, putting them 12.7 million barrels lower than the same period a year earlier [Argus].
Regional Inventories: Gulf Coast crude inventories fell sharply by 8.1 million barrels, while the Cushing storage hub saw a 1.1 million barrel decline to 24 million barrels [Argus].
Strategic Petroleum Reserve: The US SPR saw a modest increase, rising by 229,000 barrels to 415.4 million barrels [Argus].
Russian Output: JPM estimates current Russian seaborne crude exports are averaging 3.4 to 3.7 million barrels per day, noting that recent output dips are driven by cyclical factors like Baltic winter weather and Ukrainian drone strikes, not structural decline [JPM].
5.2 Crude Price Actions
Market Highlights from the Singapore Window
This morning in Brent/Dubai we traded higher, with Mar Brent/Dubai trading up from $0.65/bbl to $0.85/bbl. Liquidity was thin OTC, with only some buying by Funds in the Mar Brent/Dubai. There was Fund and Major offering the Mar/Apr Dubai spread, which traded down from $0.55/bbl to $0.45/bbl. There was some bank buying of the Mar/Apr/May Dubai spread, which traded $0.15/bbl.
Market Highlights from the European Window
Crude strong again this afternoon in Dated with Mar DFL trading up to $1.15/bbl and Apr DFL up to $0.85/bbl, as well as Mar/Apr DFL trading up to $0.45/bbl. Brent/Dubai we traded higher, with Mar trading between $0.80/bbl to $0.90/bbl. There was some Chinese hedging sellside flow, Jun ICE vs Apr Dub trading $0.65/bbl. The spreads saw two sided flow, refiner buying down the curve, Fund and Tradehouse selling. The Mar/Apr spread traded up from $0.45/bbl to $0.55/bbl, reversing much of the previous day's weakness.
5.3 Naphtha
Synthesis
The naphtha market remains heavily influenced by the broader macroeconomic and geopolitical currents driving the entire energy complex, with prices finding significant upward momentum as crude oil tests multi-month highs. While the fundamental demand picture from the petrochemical sector remains mixed, the sheer strength of upstream crude, driven by US-Iran tensions and substantial EIA inventory draws, is forcing naphtha flat prices higher [Platts]. In Asia, end-users are navigating a challenging environment where the cost of feedstock is rising faster than the price of downstream derivatives like ethylene and propylene, putting severe pressure on cracker margins [RIM]. Despite these margin pressures, baseline demand remains intact as producers attempt to maintain operating rates, leading to steady procurement activity in the spot market [RIM]. Furthermore, the global naphtha balance is being impacted by shifting trade flows; as noted in broader market reports, the diversion of US and Russian barrels—some of which are tied up in the 375 million barrels of "stuck at sea" sanctioned crude highlighted by GS—is limiting arbitrage opportunities and tightening regional availability [GS]. The European market is relatively balanced but is seeing support from the lack of aggressive import competition, allowing local refiners to maintain reasonable premiums for prompt delivery [EA]. The interplay between rising flat prices and compressed cracking margins will be the critical dynamic to watch in the coming weeks.
Key Themes
Upstream Price Contagion: The dominant theme in the naphtha market is the direct transmission of crude oil's geopolitical and inventory-driven strength into naphtha flat prices, overshadowing weak downstream fundamentals [Platts].
Cracking Margin Squeeze: Petrochemical producers are caught in a severe margin squeeze. The cost of naphtha is rising rapidly, but the ability to pass these costs onto consumers of plastics and polymers is limited by sluggish global economic growth [RIM].
Arbitrage Disruptions: Global trade flows are constrained by the sheer volume of sanctioned crude and products floating at sea, as identified by GS, which is disrupting traditional East-West naphtha arbitrage routes and forcing buyers to rely more heavily on regional supply [GS].
Resilient Asian Demand: Despite the poor economics, Asian cracker operators are still stepping into the spot market to secure necessary feedstock, providing a floor for cash differentials even as paper margins deteriorate [EA].
Key Market Drivers:
Crude Oil Rally: The surge in WTI and Brent futures to six- and seven-month highs respectively acts as an unbreakable floor for naphtha pricing [Argus].
Sanctioned Fleet Dynamics: The massive volume of Russian, Iranian, and Venezuelan energy products trapped on water is creating localized tightness and preventing price-depressing gluts in major consumption hubs [GS].
Macroeconomic Sentiment: Positive data out of the US and hopes for rate cuts are keeping broader market sentiment buoyant, which indirectly supports expectations for future petrochemical demand recovery [GS].
Downstream Polymer Pricing: The struggle of ethylene and propylene prices to keep pace with naphtha is the primary bearish counterweight to the market's current strength [RIM].
Supply/Demand Fundamentals:
European Availability: Supply in Northwest Europe remains adequate, but the lack of strong inbound arbitrage flows is preventing any significant buildup of excess inventory [EA].
Asian Procurement: Tenders from major North Asian petrochemical producers indicate a steady, albeit cautious, appetite for first-half and second-half March delivery cargoes [RIM].
Refinery Runs: Robust refinery utilization rates globally are ensuring a steady stream of straight-run naphtha, though this is easily absorbed by the current market structure [Platts].
LPG Substitution: Elevated prices for alternative feedstocks like propane and butane mean that naphtha remains the primary, unavoidable choice for many flexible crackers in Asia [RIM].
5.4 Naphtha Price Actions
Market Highlights from the Singapore Window
This morning in naphtha, MOC was better bid with flat price trading $615.50/mt end window. The complex caught a strong bid on the back of the overnight crude rally. MOPJ cracks mainly traded on screen, finding value at -$1.55/bbl in May for size, showing significant resilience despite the flat price surge. Spreads were balanced, trading at $9/mt in Mar/Apr through the morning. E/W had mixed interest, trading 25c higher around $39/mt, with interest in Cal’27 at $24.25/mt. Naphtha cracks were stronger, firming from -$5.10/bbl to -$4.90/bbl in Mar after the window as buyers rushed to secure prompt barrels. Spreads were bid, firming to $7/mt in Mar/Apr.
Market Highlights from the European Window
This afternoon in Naphtha, MOC was bid with flatprice trading $585.25/mt end window. Naphtha cracks were exceptionally well bid during the window, rising sharply from -$5.15/bbl to -$4.85/bbl as the European market reacted to the sustained crude strength. Spreads remained buyside, seeing lots of interest in Sep/Oct at $1.50/mt. E/W remained strong, trading up to $38/mt in the front month, keeping the arbitrage window firmly closed. MOPJ cracks were active, finding value at -$1.1/bbl in Mar pre window, then trading even higher on screen at -$0.85/bbl into the European close. Spreads were heavily bid, with key interest in Jun/Dec at $23.25/mt.
5.5 LPG/NGLs
Synthesis
The US LPG and NGL markets experienced a notable divergence between fundamental inventory data and price action, highlighting a complex seasonal transition. Despite the US Energy Information Administration (EIA) reporting a significant draw in inventories, US Gulf Coast propane prices actually fell slightly [Platts]. The EIA data revealed that US propane and propylene inventories dropped by 3.084 million barrels to 74.185 million barrels, breaking below the 75 million barrel mark and hitting their lowest level since June 2025 [EIA]. This draw exceeded the expectations of analysts, who had projected a shallower decline of 2.777 million barrels [Platts]. However, the market's reaction was muted, with Enterprise terminal propane assessments dropping by 0.375 cents/gallon to 60.5 cents/gallon, a stark contrast to the 90.375 cents/gallon assessment seen a year prior [Platts]. This counter-intuitive price movement suggests that the market is already pricing in the end of the winter heating season and anticipating a structural slowdown in domestic demand. Furthermore, analysts noted that this was the smallest weekly stock decrease in the past month, reinforcing the view that peak winter demand has passed [Platts]. In the broader context, the tightness in visible inventories is mitigated by the massive amount of energy products currently floating at sea, as highlighted by GS, which prevents panic buying in the global markets [GS].
Key Themes
Bearish Price Reaction to Bullish Data: The most striking theme is the disconnect between the larger-than-expected inventory draws reported by the EIA and the subsequent drop in Gulf Coast propane prices, signaling a market looking past current tightness toward spring [Platts].
Seasonal Demand Destruction: The slowing pace of inventory draws—the smallest in a month—indicates that the peak winter heating demand period is definitively winding down, removing a critical pillar of price support [Platts].
Historical Price Weakness: Current propane prices at around 60.5 cents/gallon are dramatically lower than the 90+ cents/gallon seen exactly a year ago, reflecting a fundamentally better-supplied global market heading into the shoulder season [Platts].
Inventory Milestones: Despite the price drop, the fact that US propane stocks have fallen to their lowest levels since June 2025 (74.185 million barrels) sets a low baseline for the upcoming injection season [EIA].
Key Market Drivers:
EIA Inventory Report: The official confirmation of a 3.084 million barrel draw was the primary data point for the week, even if the market reaction was counter-seasonal [EIA].
Analyst Expectations: The fact that the draw beat S&P Global CERA expectations of a 2.777 million barrel decline shows that demand remained slightly stronger than modeled, though not enough to lift prices [Platts].
Weather Normalization: Moderating temperatures across key consuming regions in the US and Europe are rapidly destroying remaining heating demand for propane [Argus].
Global Overhang: The overarching macro environment, described by GS as featuring a global surplus with millions of barrels stuck at sea, is dampening any bullish enthusiasm in the NGL space [GS].
Supply/Demand Fundamentals:
US Total Stocks: Propane and propylene inventories currently stand at 74.185 million barrels, the lowest since the week ended June 22, 2025 [EIA].
Export Economics: With domestic prices easing, the arbitrage window for US LPG exports to Asia and Europe remains a critical focus for clearing remaining winter volumes [EA].
Petrochemical Substitution: At current price levels, propane remains an attractive feedstock alternative to naphtha for flexible steam crackers, providing a baseline of industrial demand [RIM].
5.6 LPG/NGLs Price Actions
Market Highlights from the Singapore Window
This morning in NGLs, the market was highly reactive to the overnight crude surge. FEI initially stronger this morning with prompt spreads getting bid up and the front arb weakening from FEI strength, with refiners aggressively on the buyside of March LST/FEI at -$225/mt. March/April FEI trades up to $29/mt where it finds some resistance but remains supported, hovering around $28.50/mt by end of window. Strong interest in flat price with $585/mt getting lifted in March FEI on screen, showing real panic buying from short-covered players. Chinese trade buying interest in Q4 FEI/MOPJ this morning was elevated at -$30/mt.
Market Highlights from the European Window
Active afternoon in NGLs following the EIA prints. LST spreads slightly firmer with March/April and April/May trading up to 0.50c/gal and 0.25c/gal respectively as the market digested the inventory draw. Massive buy side interest in FEI/MOPJs this afternoon, with trade buying March FEI/MOPJ and hedger buying flow in a cross FEI/MOPJ strip to capture the widening spread.
5.7 Gasoline/Mogas
Synthesis
The US gasoline market presented a dynamic and somewhat contradictory picture, driven by a combination of robust implied demand, significant inventory draws, and localized spot market gluts. According to the EIA, US total gasoline inventories finally broke a 13-week streak of increases, falling by 1.3% week-over-week to settle at 255.8 million barrels [EIA]. This draw from a more than five-year high was propelled by a sharp rise in product supplied—a proxy for demand—which jumped 5.4% on the week to 8.75 million b/d, the highest level in three weeks and 6.2% higher than the same period a year ago [EIA]. However, despite this bullish national data, localized physical markets exhibited severe weakness. In New York Harbor, RBOB cash differentials plummeted to a seasonal low, hitting a discount of 5.13 cents/USG to the March Nymex contract, the widest since March 2025 [Argus]. This localized crash in differentials was caused by a massive prompt spot surplus, generated by steady domestic resupply from the Gulf Coast and rising local production levels [Argus]. Overall, while the national demand picture looks surprisingly strong according to the EIA, the physical cash markets are struggling to clear immediate spot surpluses, creating highly volatile trading conditions.
Key Themes
National Draw vs. Localized Glut: The most prominent theme is the divergence between the bullish national EIA data (showing a break in the 13-week inventory build) and the bearish reality of the physical spot markets, particularly the massive surplus crushing differentials in New York Harbor [EIA, Argus].
Resurgent Implied Demand: The sharp 5.4% weekly increase in gasoline product supplied to 8.75 million b/d suggests that consumer driving demand is recovering much faster than anticipated for this time of year, providing underlying support to the Nymex futures complex [EIA].
RVP Transition Pains: Gulf Coast markets are experiencing typical volatility associated with the transition from winter-grade to lower-RVP spring-grade gasoline, causing refiners to aggressively clear out old stock and pressuring differentials [Platts].
Arbitrage Flows: The open paper arbitrage from the Gulf Coast to the East Coast earlier in the year has successfully flooded New York Harbor with blendstocks, achieving its goal but ultimately collapsing the local cash premium [Argus].
Key Market Drivers:
EIA Inventory Report: The official confirmation of a 1.3% decline in national gasoline stockpiles provided the macro-level bullish catalyst for the week [EIA].
Nymex Futures Strength: The relentless rally in upstream crude oil is pulling Nymex RBOB outright prices higher (up 3 cents to $1.96/USG), masking the severe weakness in the underlying physical cash differentials [Argus].
Colonial Pipeline Economics: The flow of CBOB and RBOB from the Gulf Coast to the Atlantic Coast has oversaturated the destination market, pushing NYH differentials below the pipeline tariff [Argus].
Supply/Demand Fundamentals:
US Total Gasoline Stocks: Dropped to 255.8 million barrels, down from a five-year high, but still 3.2% higher than a year ago [EIA].
Implied Demand: The four-week average of gasoline product supplied rose to 8.49 million b/d, up 2.8% from the previous period [EIA].
5.8 Petrochemicals
Synthesis
The petrochemical sector, particularly the aromatics complex, is experiencing a period of cautious optimism driven almost entirely by the relentless upward trajectory of the upstream energy complex. US Gulf Coast benzene spot prices registered slight but consistent gains, rising 1 cent/gallon day over day to be assessed at 314 cents/gallon for both FOB and DDP [Platts]. This upward movement is a direct consequence of the surge in crude oil futures, with WTI hitting multi-month highs on geopolitical fears [EIA]. The market structure for benzene remains active, with the March contract price trading window seeing an estimated 230,000 barrels change hands, indicating that downstream consumers are stepping in to secure material before prices escalate further [Platts]. Similarly, ethylbenzene spot prices mirrored this strength, jumping 4 cents/gallon for both February and March assessments [Platts]. However, this price strength is largely "cost-push" rather than "demand-pull." As highlighted by the broader macro views from GS and JPM, while there is a rotation into commodities and some economic resilience, the underlying demand for end-use plastics and polymers remains sluggish. Petrochemical producers are therefore trapped in a scenario where their feedstock costs (naphtha and benzene) are rising rapidly, but their ability to pass these costs onto consumers is severely limited, resulting in persistent margin compression across the value chain.
Key Themes
Cost-Push Price Escalation: The primary theme in the petrochemical markets is the direct translation of crude oil's geopolitical risk premium into higher spot prices for building block chemicals like benzene and ethylbenzene [Platts].
Margin Squeeze Continues: While spot prices are rising, the fundamental issue of compressed margins remains unresolved, as downstream derivative pricing struggles to keep pace with the soaring cost of aromatics and olefins [EA].
Active Contract Negotiation: The high volume of trading in the March benzene contract window (230,000 barrels) suggests that buyers are eager to lock in prices now, fearing that the US-Iran tensions could drive the energy complex even higher [Platts].
Macro Disconnect: There is a notable disconnect between the bullish price action in the chemical spot markets and the more cautious, surplus-focused macro outlooks provided by institutions like JPM and GS [JPM, GS].
Key Market Drivers:
WTI and Brent Rally: The $1.24/bbl surge in NYMEX March WTI directly elevated the entire aromatics complex, maintaining the benzene-to-crude ratio at a healthy 1.99 [Platts].
Geopolitical Tensions: The threat of US military action in the Middle East is the ultimate catalyst forcing petrochemical buyers to abandon just-in-time inventory strategies and secure physical product [EIA].
Spot Market Liquidity: Verified trades, such as the March delivery done at 314 cents/gal DDP in the Lower Mississippi River, are providing solid physical benchmarks for the rising paper market [Platts].
Macroeconomic Resilience: Strong US consumer data and rising equity markets provide a faint but necessary glimmer of hope that end-user demand for polymers might eventually recover to support these higher price levels [GS].
Supply/Demand Fundamentals:
Benzene Assessments: Platts assessed February and March benzene at 314 cents/gal and 312 cents/gal respectively, showing slight backwardation but overall firmness [Platts].
Ethylbenzene Spikes: Ethylbenzene saw more aggressive upward movement, with February DDP assessed at 260 cents/gal and March at 283 cents/gal, up 4 cents on the day [Platts].
Refinery Runs: Steady US refinery utilization is ensuring adequate supply of reformate and pyrolysis gasoline, preventing an absolute shortage of aromatics despite the price hikes [EIA].
Benzene-to-Crude Ratio: The ratio holding near 1.99 indicates that benzene producers are currently able to maintain their historic pricing relationship relative to their crude oil input costs [Platts].
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