Light Ends: Outside of NWE, global naphtha cracks eased slightly w/w, and we expect rebounds in exports from Russia and the Med, as well as continued Kuwaiti exports to add to lengthening conditions and decreasing cracks in the coming weeks. Although, Asian petchem demand has been stronger-than-anticipated in recent weeks, utilization rates at crackers will soften shortly due to negative margins and a large naphtha cracker in Taiwan is planning a shutdown for August. Meanwhile, gasoline blending demand has shown signs of improvement in Europe, but it remains a lackluster driving season and we do not expect it to meaningfully improve over July.

Gasoline: Global gasoline cracks continue meandering in the narrow bandwidth seen over the past couple of weeks, failing to sustain the positive momentum from the past week and losing some ground in the most recent readings, as the brief recovery in Europe has faltered. Looking ahead, we retain our view that the near term has little in store for gasoline markets, with a robust pick-up in US crude intake and utilization rates over the past two weeks continuing to paint a bleak picture. Not just there, but also in NWE, we see the end of turnarounds adding more length to the NWE balance this month, whilst exports out of the region continue to struggle to catch up with historical levels. In the East of Suez, the outlook remains slightly more positive, amid a looming decline in Chinese exports this month, to the tune of 60 kbd m/m, according to preliminary schedules, amid subdued stocks at home as well as a multi-year low level of primary runs in Japan and persistent operational issues in Indonesia.

Middle Distillates: Cracks have begun to lose some ground as the USGC returns to normalcy after Hurricane Beryl. Meanwhile, the Singapore market appears more constructive amid a turnaround in Australia and its refiners’ inability to draw down on inventories given its minimum stockpiling mandate. Ultimately, the key theme for this quarter is ample supply from the Middle East, Russia, and India, eating into market share in Latin America and Northwest Europe. This competition for limited buyers should pressure cracks for the foreseeable future.

Residue: After peaking at the beginning of June, Singapore’s HSFO cracks have pulled back by about $4-5/bbl as increasing cargo arrivals helped to ease supply tightness. Nonetheless, the cracks are still elevated compared to most of the time in the last two years. While depressed middle distillate and gasoline cracks have pressured complex refinery margins globally, strong HSFO cracks have made feedstock selection and profit maximization more challenging.

Freight: Clean MR rates from the US Gulf dropped this week as Hurricane Beryl made landfall, affecting ship movements and loadings. Rates in Europe picked up after a weak June, primarily supported by a reduction in the ballast count. In Asia, weaker exports continue to depress rates while in the Middle East, stability in the ballast count has kept rates flat.

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