To The Moon

5.1 Crude/Brent

The crude oil market is currently defined by extreme volatility and conflicting signals as the US-Iran conflict approaches its fourth week. Despite reports of a potential 15-point ceasefire plan proposed by the United States, Iran has publicly rejected the outreach, calling the demands "excessive" and "deceptive" (Bloomberg). Tehran continues to demand a complete halt to aggression, reparations for war damages, and recognition of its authority over the Strait of Hormuz before any negotiations can occur (Argus).

Consequently, the Strait remains effectively closed, halting approximately 15 million barrels per day of crude shipments and forcing major producers to find alternative routes (Bloomberg). Saudi Arabia has responded by surging exports from its Yanbu terminals on the Red Sea, aiming for a 5 million barrel per day target, although this diversion only offsets about half of the lost Persian Gulf volumes (Bloomberg).

In the United States, commercial crude inventories rose by 6.9 million barrels last week to 456.2 million barrels, primarily driven by a sharp drop in exports which fell by 1.6 million b/d (Argus).

Geopolitical risk remains high as Iran-aligned Houthi rebels threaten to block the Bab el-Mandeb strait if the US launches ground operations on Iranian territory (Argus). Meanwhile, ExxonMobil has sent a team to Venezuela to assess the state of the nation's neglected oil infrastructure, suggesting a long-term interest in rebuilding production capacity despite current political hurdles (Argus). Market participants are also monitoring fresh Israeli strikes on infrastructure in Isfahan, Iran, which have maintained the war risk premium (Bloomberg).

Industry leaders at CERAWeek have expressed concern that even if the war ends immediately, supply chains will take months to return to full capacity, potentially keeping prices elevated (Bloomberg).

5.3 Naphtha

The Asian naphtha market experienced a significant decline following the pullback in global crude oil prices. Open-spec naphtha benchmark prices in Japan were assessed in the range of $957.25-1,023.75/mt, a sharp drop of $98.00/mt from the previous session (RIM). Supply remains extremely tight across Northeast Asia, as traditional flows from the Red Sea and Fujairah have been severed by the ongoing Middle East conflict (RIM).

In response, trading houses are actively attempting to source arbitrage cargoes from the US and Europe to meet regional shortfalls (RIM). In the spot market, Taiwan's Formosa Petrochemical Corp (FPCC) issued a buy tender for a first-half May delivery cargo, while petrochemical companies in Japan expressed concern that refined naphtha would be prioritized as a gasoline blending component (RIM).

The market structure remains in a steep backwardation of $123.50/mt between H1 May and H1 June, reflecting the acute immediate scarcity (RIM). European naphtha prices also weakened, with April NWE prices falling by $54.00/mt to approximately $833.00/mt (RIM). This price action narrowed the East-West spread to $248.00/mt in favor of Asia (RIM).

The market is also reacting to Ukrainian drone attacks on the Ust-Luga terminal in Russia, a key naphtha export outlet, which has caused fires and suspended loadings (Argus). Operational rates at refineries in South Korea, Taiwan, and China (CNOOC, Sinochem) continue to decline due to feedstock shortages, further tightening regional product availability (RIM). Demand from the petrochemical sector is being weighed down by the bearish performance of downstream derivatives like polyethylene and polypropylene, making buyers cautious about high feedstock costs (RIM).

5.5 LPG/NGLs

Asian LPG prices plummeted on Wednesday, with propane and butane for second-half April delivery dropping by $101/mt to the $877-887/mt range (RIM). The crash was primarily driven by the decline in crude oil prices during Asian trading hours, which pressured the entire energy complex (RIM).

Despite the fall in flat prices, premiums to the Saudi Contract Price (CP) remain significantly elevated due to short-covering demand from regional players (RIM). In the US Gulf Coast, propane prices for April and May loading dived by $58/mt to $577-587/mt (RIM). Loading delays of three to four days have been reported at the Enterprise terminal, not due to weather but because of an shift in cargo ratios toward 50:50 propane/butane mixes, which has stretched cooling facility capacity (RIM).

The USGC-to-Japan arbitrage remains a focal point, with netbacks from CFR Japan to FOB USGC calculated at approximately $658.00/mt, suggesting the window is closely monitored by traders (RIM). In China, demand remains mixed; while PetroChina showed buying interest for May delivery to Ningbo, Jinneng Chemical cancelled its buy tender for a 46,000mt cargo due to excessively high offer levels (RIM).

North China PDH plants, such as Haiwei Petrochemical, remain shut down as low stocks and high replacement costs make operations uneconomic (RIM). Freight rates for VLGCs on the USGC-to-Far East route advanced by $4/mt to $168-170/mt as robust chartering demand continues to support the market (RIM)

5.7 Gasoline/Mogas

The gasoline market is currently experiencing a structural reorientation as the closure of the Strait of Hormuz reshapes global flows. While gasoline originally lagged the price spikes seen in distillates and naphtha, it is now repricing the "Hormuz shock" as inventories in the East of Suez remain constrained (Sparta).

Multiple cargoes are now loading in the ARA region and signaling Singapore, as European barrels fill the gap left by sidelined Middle Eastern swing suppliers (Sparta). For May delivery, ARA has emerged as the cheapest origin for destinations including South Africa, Australia, and Nigeria (Sparta). In the Asian physical market, prompt swaps fell as Iran confirmed it would allow "non-hostile" vessels to pass through the Strait, lifting market sentiment regarding future supply (Argus).

The April-May 92R spread narrowed by more than $2/bl to below $8/bl backwardation (Argus). However, supply remains tight in Northeast Asia as refiners cut runs due to crude feedstock shortages (RIM). Conversely, high run rates at US refineries and available export cargoes for Asia are capping some of the price upside (RIM).

In Japan, retail prices are being capped at ¥170/litre through government subsidies, which has reduced the domestic appetite for expensive imported gasoline (Argus). In the United States, retail prices rose to an average of $3.961/USG, buoyed by the ongoing conflict (Argus). US gasoline stocks fell by 2.6 million barrels last week to 241.4 million barrels, hitting a 12-week low as domestic demand increased by 2.3% (Argus).