To The Moon

5.1 Crude/Brent

Synthesis

The global crude oil market is currently navigating a complex environment defined by the intersection of heightened geopolitical risks and underlying structural surpluses, a dynamic that has pushed Brent crude prices decisively above the $71 per barrel threshold. Market sentiment is heavily influenced by escalating tensions between the United States and Iran, prompting a significant recovery in speculative positioning and injecting a substantial risk premium into the energy complex. Goldman Sachs has recently raised its 2026 price forecast, noting that while they maintain an expectation of a persistent global surplus, the anticipated price floor for Brent has been elevated to $60 per barrel by the fourth quarter of 2026. This upward revision is primarily driven by lower-than-expected inventory builds within OECD commercial pricing centers. A critical phenomenon identified by Goldman Sachs is the massive volume of sanctioned crude currently "stuck at sea." Approximately 375 million barrels of crude oil from Russia, Iran, and Venezuela are floating on the water, effectively masking the true extent of the global oversupply and preventing it from depressing benchmark prices in traditional trading hubs. This accumulation accounts for roughly one-third of all global visible crude year-over-year builds. Furthermore, Goldman Sachs calculates that the current geopolitical environment has embedded a $6 per barrel risk premium into flat prices, supported by a surge in call options implied volatility as traders seek insurance against potential supply shocks. In contrast to this geologically driven bullishness, other market observers note that underlying fundamentals remain relatively soft, with the surplus expected to persist as non-OPEC+ supply growth continues to outpace incremental demand. Adding to the geopolitical tapestry, the Hungarian government has authorized the release of 250,000 barrels of crude from its strategic reserves to prioritize local refiner MOL following disruptions in the Druzhba pipeline network. Meanwhile, diplomatic channels remain highly active, with the United States engaging in negotiations to facilitate the sale of Venezuelan crude to India, an effort aimed at helping the subcontinent diversify its energy imports away from Russian reliance. Despite these localized physical market shifts, the overarching narrative remains dominated by the tug-of-war between the paper market's geopolitical fears and the physical market's bloated, albeit geographically dislocated, inventory levels.

Key Themes

The "Stuck at Sea" Phenomenon: The accumulation of 375 million barrels of sanctioned crude oil on the water is fundamentally distorting global inventory metrics. Because these barrels are not landing in OECD commercial storage tanks, the perceived availability of crude in major pricing centers appears artificially tight, supporting benchmark prices despite a broader global surplus.

Geopolitical Risk Premium Calibration: Goldman Sachs explicitly quantifies the current geopolitical tension, particularly surrounding Iran, as contributing a $6 per barrel risk premium to current Brent prices. The market's pricing of options indicates a heightened probability of extreme upside tail risks, though baseline forecasts still assume no actual physical supply disruptions will occur.

Shifting Global Trade Arteries: The potential integration of Venezuelan crude into the Indian refining sector, actively negotiated by US officials, represents a significant realignment of global heavy crude flows. This move is designed to reduce India's dependence on Russian barrels, which currently stand at 1.2 million barrels per day but are expected to decline.

OECD Inventory Resilience: A major factor behind revised price forecasts is the realization that only a small fraction of the global surplus is materializing in OECD storage. Forecasts now assume that only 19% of the 2026 global inventory builds will show up in OECD commercial stocks, with the rest absorbed by floating storage and non-OECD strategic reserves.

Macro-Economic Spillover: The crude market is also benefiting from a broader macro rotation into hard assets. As equity valuations stretch to historic highs and inflation concerns persist, institutional capital has flowed into commodities, providing a supportive undercurrent to oil prices independent of immediate physical supply and demand balances.

Key Market Drivers:

US-Iran Relations: Ongoing rhetoric regarding Iran's nuclear enrichment program and the threat of US intervention remains the most potent daily driver of intraday price volatility.

Call Options Skew: An extreme steepening in the implied volatility skew for crude oil call options demonstrates that market makers are demanding significant premiums to provide upside insurance.

Financial Positioning: The unwinding of short positions and the influx of fresh speculative long capital in response to geopolitical headlines have exacerbated the upward momentum in flat prices.

Tariff and Trade Policy Uncertainty: Fluctuations in the US Dollar triggered by recent Supreme Court rulings on tariffs and trade policy are causing corresponding mechanical adjustments in dollar-denominated crude pricing.

Strategic Petroleum Reserve Releases: Sovereign interventions, such as Hungary's release of 250,000 barrels from strategic stocks, provide localized relief but highlight underlying infrastructural vulnerabilities in Eastern Europe.

Supply/Demand Fundamentals:

Sanctioned Fleet Inventories: The 375 million barrels of floating Russian, Iranian, and Venezuelan crude represent a massive shadow inventory that overhangs the market but cannot be easily cleared.

Russian Export Volumes: Russian crude exports to India have stabilized at approximately 1.2 million barrels per day, down from historical peaks of over 2 million barrels per day, reflecting tightening enforcement and shifting buyer preferences.

Venezuelan Production Growth: General licenses issued by Washington are paving the way for international majors to advance natural gas and crude projects in Venezuela, slowly rehabilitating the country's export capacity.

OECD Stock Deficits: The persistent failure of OECD commercial inventories to build at historical rates during surplus periods is keeping prompt time spreads in a supportive backwardated structure.

Pipeline Disruptions: The halt of flows along the Druzhba pipeline forces landlocked European refiners to seek alternative, often more expensive, seaborne crude supplies.

5.2 Crude Price Actions

Market Highlights from the Singapore Window

The front-month Apr'26 Brent futures contract exhibited significant strength during the Asian trading session, rising from $70.17/bbl at the start of the day to peak at $71.60/bbl by the mid-morning hours, before softening slightly to trade around $71.10/bbl. The market caught a strong bid as participants digested statements from Iran’s atomic energy chief indicating an uncompromising stance on nuclear enrichment, which escalated regional tension parameters. In the Brent/Dubai exchange of futures for swaps market, trading levels moved higher, with the March Brent/Dubai spread climbing from $0.65/bbl to $0.85/bbl. Liquidity in the over-the-counter market was relatively thin, characterized primarily by fund buying in the March Brent/Dubai contracts.

Market Highlights from the European Window

The Apr’26 Brent Futures contract experienced intense volatility during the European afternoon, rallying to $71.82/bbl before experiencing a sharp, sudden drop to $70.96/bbl. This precipitous decline was triggered by headlines quoting the US President stating that "good talks" were occurring with Iran, temporarily deflating the geopolitical risk premium. However, the market quickly reversed course, rallying aggressively back up to $71.93/bbl by the close of the window as traders reassessed the likelihood of an imminent deal. The physical Dated Brent market demonstrated extreme strength, with March DFL trading up to $1.15/bbl and April DFL surging to $0.85/bbl.

5.3 Naphtha

Synthesis

The global naphtha complex is currently being dictated by the sheer velocity of the upstream crude oil rally, which is dragging flat prices higher despite a distinctly bearish fundamental environment in the downstream petrochemical sector. Spot market activity out of Japan indicates that buyers are cautiously emerging, with major entities like Mitsui Chemicals seeking 25,000 metric tons of open-spec naphtha for first-half April delivery. However, this procurement is set against a backdrop of declining utilization rates; data shows that Japanese naphtha-fed steam cracker runs fell sharply to 75.8% in January, reflecting the severe margin compression operators are facing. The cost of naphtha is rising rapidly due to geopolitical premiums embedded in Brent and WTI, yet the ability to pass these costs through to derivatives like ethylene and propylene remains fundamentally broken due to sluggish end-user demand. Consequently, cracker operators are forced to throttle back production to minimize negative cash margins. Compounding the issue is the shifting landscape of regional trade flows. Singapore's imports of naphtha, reformates, and other gasoline blendstocks surged by an astonishing 127.77% week-on-week, highlighting a massive influx of material into the Southeast Asian hub. Much of this flow is structurally displaced material, as traditional arbitrage routes from the West are complicated by high freight rates and the absorption of US Gulf Coast heavy naphtha into the Venezuelan diluent pool. Furthermore, the pricing cues for the naphtha market are increasingly being derived from the aromatics sector, where robust strength in paraxylene, toluene, and benzene is providing a floor for heavier, high-aromatic naphtha grades. The market is thus trapped in a paradigm where feedstock costs are artificially inflated by macro and geopolitical factors, while physical demand is actively being destroyed by the resulting poor economics.

Key Themes

Upstream Cost Contagion: The primary narrative in the naphtha market is its absolute tethering to the crude oil rally. Geopolitical events in the Middle East are directly inflating the flat price of naphtha, completely overriding local supply and demand balances in the petrochemical hubs.

Cracker Margin Destruction: The plunge in Japanese steam cracker operating rates to 75.8% is a glaring indicator of the crisis in petrochemical profitability. Operators simply cannot justify high run rates when the spread between naphtha feedstock and olefin outputs remains deeply in negative territory.

Aromatics Market Support: While the olefins chain struggles, the aromatics chain (benzene, toluene, xylenes) is demonstrating relative strength, which in turn supports the pricing of heavy naphtha grades suitable for reforming operations.

Trade Flow Dislocation: The massive 127% weekly spike in Singapore blendstock imports suggests that regional hubs are becoming dumping grounds for cargoes that cannot find homes in traditional arbitrage destinations, leading to localized supply gluts.

Lunar New Year Lull: Trading liquidity and physical spot discussions have been severely hampered by the absence of Chinese market participants due to the extended Lunar New Year holidays, leaving the market to trade primarily on paper and upstream sentiment.

Key Market Drivers:

Brent Futures Trajectory: Every cent gained in the ICE Brent futures contract translates directly into higher C+F Japan naphtha assessments, regardless of physical cracker demand.

Geopolitical Rhetoric: The aggressive posture of the US administration toward Iran, explicitly tying a 10-day window to potential escalations, is forcing naphtha shorts to cover their positions aggressively.

Asian Aromatics Pricing: Higher assessments for CFR Taiwan/China paraxylene and FOB Korea benzene are raising the intrinsic blending value of full-range naphtha.

Refinery Run Adjustments: As cracking margins fail, refiners and integrated petrochemical complexes are optimizing their yields toward gasoline blending or aromatics extraction rather than steam cracking.

Freight Market Dynamics: High clean tanker rates are trapping marginal barrels within their respective regional basins, preventing an efficient clearing of the global naphtha surplus.

Supply/Demand Fundamentals:

Japanese Cracker Utilization: Run rates plummeting to the mid-70% range signify a massive reduction in structural baseline demand for open-spec naphtha in Northeast Asia.

Singapore Import Volumes: The immense week-on-week surge in imports indicates that supply availability in the spot market remains exceptionally high, creating a bearish physical undercurrent.

Spot Tender Activity: Solitary tenders, such as Mitsui's requirement for April delivery, show that buyers are transitioning to a strict hand-to-mouth procurement strategy.

Alternative Feedstock Pricing: While propane and butane prices have seen their own volatility, they occasionally price into the cracking pool, further displacing naphtha demand at the margins.

Inventories: While official regional stockpiles fluctuate, the volume of material arriving in blending hubs like Singapore points to a market that is fundamentally well-supplied.

5.4 Naphtha Price Actions

Market Highlights from the Singapore WindowThis morning in naphtha, the Market on Close was notably better bid, with the outright flat price trading up to $615.50/mt by the end of the window. The entire complex caught a strong bid on the back of the overnight crude oil rally. MOPJ cracks against Brent mainly traded on screen, finding value at -$1.55/bbl in the May contract for size, demonstrating significant resilience despite the massive surge in the underlying flat price. Calendar spreads remained balanced and constructive, trading at $9/mt in the March/April spread throughout the morning session. The East/West spread saw mixed interest but managed to trade 25 cents higher, hovering around $39/mt. Naphtha physical cracks were markedly stronger, firming from -$5.10/bbl to -$4.90/bbl in March immediately following the window as buyers rushed to secure prompt barrels in a rising market.

Market Highlights from the European Window

This afternoon in Naphtha, the MOC process was firmly bid, with the Northwest European flat price trading at $585.25/mt by the end of the window. Naphtha cracks in Europe were exceptionally well bid during the assessment period, rising sharply from -$5.15/bbl to -$4.85/bbl as the regional market reacted intensely to the sustained strength in crude benchmarks. Forward spreads remained heavily skewed to the buy-side, seeing substantial volume and interest in the September/October spread at $1.50/mt. The East/West spread remained robust, trading up to $38/mt in the front month, a level that keeps the traditional arbitrage window to Asia firmly closed and traps barrels in the West. MOPJ cracks traded actively, initially finding value at -$1.1/bbl in March prior to the window, before trading even higher on the screen at -$0.85/bbl heading into the European close

5.5 LPG/NGLs

Synthesis

The global LPG and NGL markets are currently exhibiting a fascinating divergence between short-term physical pricing dynamics and the broader, macro-driven forward curve. In the physical spot market, US Gulf Coast propane prices have demonstrated marginal weakness, with FOB assessments for March loading losing ground to settle in the $394-$399 per metric ton range. This slight downward movement in the prompt month reflects a market that is beginning to price in the end of the peak winter heating season, anticipating a structural drop in domestic consumption as temperatures inevitably moderate. However, this prompt weakness is entirely contrasted by strength further down the curve. Prices for April loading cargoes climbed significantly, pulled upward by perceptions of increasing demand in the spring and early summer months. The premium for March loading relative to Mont Belvieu quotations remained steady in the 10.00-11.00 cents per gallon range, indicating that while flat prices may dip, the regional basis remains solid. Concurrently, the polymer-grade propylene market experienced a slight downward correction, dropping a quarter of a cent to 34.50 cents per pound. This decline contrasts sharply with the bullish trend seen earlier in the year, suggesting that the initial wave of restocking has concluded and buyers are now exhibiting resistance to higher prices. The Asian market remains a critical outlet for US exports, but the economics of this arbitrage are constantly shifting based on elevated freight rates and the persistent overhang of sanctioned energy products sitting in floating storage globally. Overall, the LPG sector is transitioning from a weather-driven winter market to a structurally complex spring market, heavily reliant on petrochemical demand to clear impending supply builds.

5.7 Gasoline/Mogas

Synthesis

The gasoline and blending components market is currently characterized by a severe disconnect between the surging futures market and the underlying, often weak, physical cash market fundamentals. In the United States, Southern US midcontinent sub-octane gasoline prices remarkably hit an over three-month high, moving inversely to bearish government data that showed regional stockpiles swelling to near an annual high. This highlights how broader macroeconomic strength and the relentless geopolitical rally in crude oil are dragging gasoline flat prices higher, completely ignoring the reality of local inventory gluts. In the US Atlantic Coast, gasoline stocks have also hit multi-year highs, yet the NYMEX RBOB contract continues to find buyers. The structural weakness in the physical market is evident in the aromatics sector, where US Gulf Coast benzene spot prices actually fell due to the anticipation of increased imports arriving in April, following recent tariff decisions. Despite this, the MTBE market in Asia paints a different picture, with FOB Singapore assessments jumping over $10/mt day-on-day, tracking the unyielding strength in related gasoline values and the broader upstream crude rally. The market is thus fractured: paper contracts and flat prices are soaring on the back of US-Iran tensions and robust macro sentiment, while physical differentials and specific blending components like benzene are struggling under the weight of incoming supply and bloated regional storage tanks.

5.8 Petrochemicals

Synthesis

The global petrochemical complex is deeply entrenched in a cost-push inflationary cycle, where skyrocketing upstream energy prices are forcing derivative values higher, irrespective of the lethargic state of end-user demand. In the aromatics chain, Asian paraxylene prices rose uniformly, with CFR Taiwan/China and FOB Korea markers both gaining $2.33/mt on the session, drawing their pricing cues entirely from the 59 cents/bbl surge in the front-month ICE Brent contract. This upstream momentum also dragged Asian benzene higher by $5/mt to $777/mt FOB Korea. The strength in the feedstocks is translating down the chain, as Purified Terephthalic Acid (PTA) prices in India jumped $19/mt week-over-week, aided by the rising cost of paraxylene and a simultaneous spike in containerized freight rates. In the polymers market, South Asian polypropylene (PP) prices rose $15/mt to $915/mt CFR due to persistent supply tightness in homopolymer grades within India. However, this steep uptrend is creating a severe stalemate; buyers are aggressively resisting these price hikes as their own margins for producing finished plastic goods are entirely decimated. In the US Gulf Coast, spot styrene prices surged $31/mt to $1,066/mt FOB, driven by acute prompt supply constraints and impending regional plant turnarounds. Ultimately, the petrochemical industry is witnessing a scenario where plant outages and surging crude oil are manufacturing a price rally that is unsupported by genuine consumer demand, leading to inevitable demand destruction.