5.1 Crude/Brent
Synthesis
Crude oil prices have demonstrated resilience, holding onto recent gains as the market balances immediate geopolitical risks against a structurally bearish medium-term outlook. Brent futures traded firmly above the $68/bbl mark, supported by a confluence of supply-side concerns and lingering diplomatic tensions. While US-Iran talks in Oman concluded with a "positive" tone, averting immediate escalation, the lack of a concrete resolution keeps a risk premium embedded in the market. Traders remain wary of potential flare-ups, particularly with Israeli Prime Minister Netanyahu scheduled to meet President Trump to discuss the Iranian nuclear file. On the physical front, supply tightness is evident as the aftershocks of the US "deep freeze" continue to hamper production in key basins, while Shell has warned of a significant long-term production shortfall of up to 800,000 b/d by 2035 due to maturing fields and reserve replacements lagging. This supply anxiety is countered by a distinctively bearish view from J.P. Morgan, which forecasts a moderation in Brent prices to a bottom of $54/bbl by the fourth quarter of 2026. The bank projects a substantial surplus of over 2 million b/d for the year, predicated on the assumption that temporary disruptions in Kazakhstan and the US will fade and that non-OPEC+ supply growth will outstrip a slowing global demand profile. JPM highlights that global oil demand growth is expected to decelerate to 1.1 million b/d in 2026, driven by efficiency gains and the electrification of transport, while US liquids supply alone is forecast to grow by 0.8 million b/d.
Key Themes
JPM Bearish Forecast: J.P. Morgan envisions a "comfortable" market balance turning into a surplus, predicting Brent to average significantly lower as 2026 progresses. They argue that non-OPEC+ supply can meet global demand growth without the need for additional OPEC+ barrels, potentially leading to a 0.5 million b/d build in global inventories.
Geopolitics & Diplomacy: The market remains sensitive to the Middle East, with the US-Iran dialogue providing a floor to prices. The potential for a new US-India trade deal involving significant energy purchases is also reshaping flows, with India actively diversifying imports away from Russia towards Venezuelan and US grades.
OPEC+ Discipline: OPEC's crude output fell in January, driven by involuntary cuts in Nigeria and Libya, alongside scheduled restraint from other members. This discipline is critical in offsetting the rising output from the Americas, particularly Venezuela, where production has recovered to near 1 million b/d following the easing of US sanctions.
Key Market Drivers:
J.P. Morgan View: A projected 2026 surplus of ~2 mb/d and a price target of $54/bbl by year-end stand in sharp contrast to current bullish sentiment.
Production Shortfalls: Shell's warning of a looming output gap highlights the structural underinvestment risks facing major IOCs.
Indian Demand: State refiners IOC and HPCL actively buying Venezuelan Merey crude indicates a strategic pivot in Asian procurement.
Supply/Demand Fundamentals:
Venezuela: Output has rebounded to ~1 mb/d, with state-run PDVSA reversing cuts in the Orinoco Belt, adding heavy barrels to the Atlantic Basin.
US Inventories: Weather-related disruptions are expected to manifest in inventory draws, though JPM expects this to be a temporary phenomenon.
OPEC Output: January production dropped by 60,000 b/d to 28.34 mb/d, reinforcing the group's commitment to market management despite internal quota challenges.
5.2 Crude Price Actions
Singapore Window
This morning in Brent/Dubai we traded higher, with Mar Brent/Dubai trading up from $0.34/bbl to $0.46/bbl. Due to IE week, there was limited liquidity OTC, with only some selling by Fund in the Mar Brent/Dubai. There was Fund and Major offering the Mar/Apr Dubai spread, which traded down from $0.44/bbl to $0.40/bbl. There was some bank buying of the Mar/Apr/May Dubai spread, which traded $0.05/bbl. There was some buyside interest in the Mar/Apr Brent Dubai box, which traded between $0.01/bbl to $0.06/bbl.
European Window
Stronger this afternoon in dated with Mar DFL trading up to $0.85/bbl and Apr DFL up to $0.64/bbl. Pre window we saw 16-20 Feb 3w lifted up to $1.93/bbl in size and 23-27 Feb 1w lifted high at $0.50/bbl. We also saw 9-13 Feb 1w bid at $0.8/bbl and 9-13 Mar/Cal Mar bid at $0.13/bbl. In the front 12-16 Feb vs 19-24 Feb was sold at $1.02/bbl. In the physical window, a trade and a major continued to bid up the back of the Midland curve, with one Midland cargo trading, pushing the implied diff up to 184c.
This afternoon in Brent/Dubai we continued to trade higher, with Mar bd trading up from $0.47/bbl to $0.55/bbl. Dubai spreads continued to be weak, with Mar/Apr trading between $0.37/bbl to $0.40/bbl as Brent spreads rallied. The Mar/Apr box rallied up to $0.13/bbl from $0.05/bbl. There was some trade selling of Apr/Jun Dubai spreads, which traded $0.68/bbl to $0.70/bbl.
5.3 Naphtha
Synthesis
The naphtha market is currently navigating a period of regional dislocation and shifting trade flows, primarily driven by the increasing pull of US supplies towards Venezuela. The use of US naphtha as a diluent for Venezuelan heavy crude production has intensified, diverting volumes that might otherwise head to Asia or Europe. This dynamic has tightened the Atlantic Basin balance, providing support to prices despite a generally lackluster petrochemical demand environment globally. In Asia, the market is finding some floor from spot buying by key end-users like Lotte Chemical and YNCC, who have secured cargoes for March delivery to maintain cracker run rates. However, the arbitrage economics from the West remain challenging due to high freight rates and the firm US Gulf Coast market. European markets are relatively balanced but are seeing some strength in crack spreads as local supplies tighten amidst the diversion of arbitrage barrels. The market is also monitoring the potential impact of weather-related delays in the Mediterranean, which could further restrict flows to the East.
Key Themes
Venezuela Diluent Demand: The redirection of US naphtha exports to Venezuela is a structural shift that is removing surplus barrels from the global pool, effectively tightening the supply side for other regions.
Asian Cracker Runs: Despite poor ethylene margins, Asian cracker operators are maintaining reasonable utilization rates, necessitating steady feedstock procurement. This resilience in demand is preventing a collapse in Asian differentials.
Arbitrage Constraints: The open arbitrage from the Mediterranean to Asia is being tested by rising freight costs and logistical hurdles, potentially stranding some barrels in the West and supporting regional premiums in the East.
Key Market Drivers:
Trade Flows: USGC heavy naphtha is increasingly pricing into the Venezuelan market, lifting the floor for global naphtha values.
Petchem Demand: Active tenders from North Asian buyers for March delivery indicate that physical requirements remain healthy despite the paper margin weakness.
Supply/Demand Fundamentals:
Inventory: European stocks in the ARA hub have shown some declines, contributing to the firmer sentiment in the NWE market.
Production: Refinery maintenance in the Middle East and potentially lower run rates in Europe could limit naphtha availability in the coming weeks.
5.4 Naphtha Price Actions
Singapore Window
This morning in naphtha, MOC was better bid with flat price trading $585.50/mt end window. MOPJ cracks mainly traded on screen, finding value at -$1.95/bbl in May for size. Spreads were balanced, trading at $8/mt in Mar/Apr through the morning. E/W had mixed interest, trading 25c around $38/mt, with interest in Cal’27 at $23.25/mt. Naphtha cracks were stronger, firming from -$5.40/bbl to -$5.30/bbl in Mar after the window. Spreads were balanced, remaining at $6/mt in Mar/Apr.
European Window
This afternoon in naphtha, MOC was bid with flatprice trading $559.5/mt end window. Naphtha cracks were mixed, seeing value at -$5.45/bbl end window for size. Spreads firmed in Mar/Apr from $6/mt to trade at $6.5/mt post window. E/W firmed 25c in Mar to $38.00/mt while May and Jun saw buying for size at $34.00/mt and $33.50/mt respectively. MOPJ crack liquidity was thin but traded on screen at -$1.25/bbl in Mar into Euro close. Spreads were slightly stronger with Mar/Apr firming to $8.25/mt.
5.5 LPG/NGLs
Synthesis
The LPG market continues to be dominated by the aftershocks of the severe US winter storm, which triggered a massive draw in propane inventories and sent domestic prices soaring. The resultant spike in Mont Belvieu prices has effectively shut the arbitrage window to Asia, creating a bifurcated market. In the US, the focus is on rebuilding stocks following the heavy heating demand, while Asian buyers are scrambling for alternative supplies from the Middle East and regional producers. The tightness in Asia is being exacerbated by active spot buying from Chinese Propane Dehydrogenation (PDH) operators, who are covering requirements for March amid delays in the restart of some domestic facilities. This demand pull is supporting CFR North Asia prices and widening the spread against the US market, although the high freight rates act as a natural cap on arbitrage flows. In Europe, the market remains relatively weak, particularly for butane, due to the overhang of gasoline blending components and lackluster petrochemical demand.
Key Themes
US Inventory Shock: The historic draw in US propane stocks has fundamentally altered the short-term balance, shifting the US from a surplus to a tighter market and supporting global price floors.
Arbitrage Closure: The spike in US domestic prices relative to international benchmarks has made exports to Asia economically unviable for the time being, stranding Asian buyers and tightening the regional balance in the Far East.
PDH Demand: The resilience of Chinese PDH demand, despite negative margins, continues to surprise the market. Operators like Wanhua Chemical are active in the spot market, supporting prices.
Key Market Drivers:
Weather: The US deep freeze remains the primary catalyst, with its lingering effects on production and inventory levels driving market sentiment.
Freight: Elevated freight rates for VLGCs are compressing arbitrage margins, making long-haul trade from the US to Asia difficult.
Supply/Demand Fundamentals:
US Stocks: The 6+ million barrel draw in US propane inventories is a multi-year outlier, signaling the severity of the recent weather event.
Asian Supply: With US volumes curtailed, Asian buyers are increasingly reliant on Middle Eastern producers, who are seeing strong bids for their cargoes.
5.6 LPG/NGLs Price Actions
Singapore Window
This morning in NGLs, March arb sells off from -$205/mt to -$214/mt with FEI flat price well supported. Prompt FEI spreads rallied, with March/April trading up to highs of $29/mt with April/May up to $12/mt and Asian trade buyside of the April/May FEI. FEI/CP stronger on the back of FEI strength with CP flat price stickier, seeing March FEI/CP valued at $15/mt end of window. 2H Europe arb better this morning with buying interest at -$98/mt.
European Window
Relatively quiet in NGLs this afternoon. Buyside interest in FEI/MOPJs on higher crude, with trade buying Q4’27 FEI/MOPJ at -$42.50/mt with Chinese buy side of April FEI/MOPJ at -$61.00/mt. Buyside interest in deferred arbs with trade paying -$142/mt in Cal’27 LST/FEI, with euro Phys busying of the April arb at -$187/mt. Fund selling Q2’26 LST flat price with LST spreads relatively sticky. In butane, producers selling Q4’26 C4 ENT with prompt butane better bid. Europe better bid in the prompt, with buyside interest in March Europe flatprice end of window – with buying in March and April Pronap also.
5.7 Gasoline/Mogas
Synthesis
The gasoline market is presenting a mixed picture, characterized by significant regional disparities. In the US, the headline story is one of oversupply, with national inventories reaching a five-year high. This glut is weighing heavily on Gulf Coast and Midwest differentials. However, a pockets of extreme tightness has emerged in the New York Harbor market, where logistical constraints caused by icy weather have hampered barge movements, driving prices to multi-week highs. In Asia, the market is generally soft, with the Singapore 92 RON complex trading in contango. The supply side in Asia is being heavily influenced by a surge in exports from South Korea, which is offsetting a seasonal decline in Chinese exports ahead of the Lunar New Year. European markets are lackluster, although there is some optimism surrounding the reopening of the arbitrage window to West Africa as the Dangote refinery undergoes maintenance, potentially clearing some of the excess barrels in the ARA hub.
Key Themes
US Inventory Glut vs. Regional Logistics: The dichotomy between record national stocks and localized shortages in the Northeast highlights the current logistical fragility of the US market.
Asian Export Dynamics: The battle for market share in Asia is intensifying, with South Korean refiners aggressively placing barrels in Singapore to fill the gap left by China, preventing any meaningful recovery in cracks.
West African Pull: The resumption of flows from Europe to Nigeria is a critical relief valve for the Atlantic Basin gasoline balance, supporting European cracks.
Key Market Drivers:
Refinery Operations: High refinery runs in South Korea and the US Gulf Coast are contributing to the global supply overhang.
Weather Impacts: Icy conditions in the US Northeast are restricting product movement, creating a localized premium market.
Supply/Demand Fundamentals:
US Stocks: The build to >257 million barrels is a major bearish signal, suggesting that demand is not keeping pace with refinery output.
Asian Spreads: The persistent contango structure in Singapore indicates that the region remains well-supplied for the near term.
5.8 Petrochemicals
Synthesis
The petrochemical sector is witnessing a complex interplay of rising upstream costs and stagnant downstream demand. In Asia, polymer prices have seen a noticeable uptick, driven by a rally in futures markets in China and rising feedstock costs for naphtha and crude. This "cost-push" inflation is lifting offers for Polyethylene (PE) and Polypropylene (PP), despite widespread concerns about the sustainability of demand. Producers are facing severe margin compression, with the spread between ethylene and naphtha remaining at record lows, well below the breakeven threshold for non-integrated operators. This challenging environment is forcing some producers to consider run cuts or extended maintenance turnarounds to manage supply. In the olefins market, propylene prices have found some support from supply tightness due to PDH plant outages in China, while butadiene prices have surged on the back of strong synthetic rubber demand and limited spot availability.
Key Themes
Margin Squeeze: The disconnect between high feedstock costs and weak derivative pricing power is the central theme, squeezing producer margins to unsustainable levels.
Futures-Led Rally: The influence of Chinese commodity futures on physical pricing is growing, with speculative flows driving up prices for products like PVC and PP even as physical fundamentals remain weak.
Supply Management: Producers are increasingly using maintenance shutdowns as a tool to manage oversupply and support prices, particularly in the ethylene chain.
Key Market Drivers:
Feedstock Costs: The rally in crude and naphtha is raising the production floor for all petrochemicals.
Plant Outages: Unplanned outages at PDH units and planned cracker turnarounds are tightening the immediate supply of monomers.
Supply/Demand Fundamentals:
Ethylene: The market remains long, with new capacity additions in China continuing to outpace demand growth.
Butadiene: A tight spot market and strong downstream pull from the tire sector are supporting a bullish trend.
5.9 Macro/Macro Economics
Synthesis
Global macroeconomic sentiment is currently being shaped by a decisive political shift in Japan and the evolving monetary policy stance of the US Federal Reserve. In Japan, Prime Minister Sanae Takaichi's landslide victory in the snap election has emboldened expectations for continued fiscal stimulus and ultra-loose monetary policy, driving a rally in the Nikkei and putting renewed pressure on the Yen. This "Takaichi trade" is a key driver of flows in Asian markets. Meanwhile, in the US, the economic narrative is shifting towards "no landing" or "soft landing," with strong consumer sentiment data and resilient labor markets challenging the consensus for aggressive rate cuts. The University of Michigan's consumer sentiment index beat expectations, suggesting that the US economy continues to run hot. This data has led markets to re-price Fed expectations, with yields likely to break higher as the "higher for longer" reality sets in. Additionally, geopolitical maneuvering continues, with China reportedly urging banks to limit exposure to US debt, adding a layer of complexity to global capital flows.
Key Themes
Japan's New Mandate: The LDP's victory is seen as a green light for Abenomics-style policies, supporting Japanese equities but complicating the BoJ's path to normalization.
US Economic Resilience: Strong data points from the US are forcing a rethink of the recession narrative, supporting the dollar and weighing on commodities that rely on a weak greenback.
Central Bank Divergence: The widening gap between a hawkish Fed (or at least "patient" Fed) and a potentially dovish BoJ is driving FX volatility.
Key Market Drivers:
Election Results: Takaichi's win is the primary driver for JPY weakness and Nikkei strength.
US Data: Robust consumer sentiment and employment figures are the main headwinds for bonds and support for the USD.
Supply/Demand Fundamentals:
Global Growth: J.P. Morgan economists see global GDP growing at a steady 2.8%, driven by resilient consumers, which underpins energy demand.
Inflation: US inflation expectations are cooling, but the strong economic activity suggests the battle is not entirely won.
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