To The Moon

5.1 Crude/Brent

Synthesis

Crude oil markets have shown significant volatility, initially retreating from recent highs before finding support from renewed geopolitical risks. Prices edged higher as traders digested conflicting reports regarding US-Iran nuclear talks, with initial reports of a cancellation driving prices up before confirmation that talks would proceed in Oman calmed sentiment. J.P. Morgan maintains a structurally bearish outlook for the medium term, forecasting Brent to average $73/bbl in 2026 due to robust non-OPEC+ supply growth outpacing demand. However, immediate support comes from US inventory data showing a 3.5 million barrel draw in crude stocks, although this was less than some industry expectations.

Key Themes

Geopolitics: Tensions in the Middle East remain a primary driver. While talks between the US and Iran are set to proceed, recent military interactions, including the downing of an Iranian drone, keep the risk premium alive.

JPM View: J.P. Morgan expects a supply surplus in 2026, driven by a 0.8 mbd increase in US liquids supply and slowing global demand growth to 1.1 mbd. They see non-OPEC+ supply capable of meeting demand without additional OPEC+ barrels.

Supply Disruptions: A severe winter storm in the US has curtailed production, contributing to the inventory draw, while Russian export flows face continued scrutiny and logistical challenges.

OPEC Output: OPEC's crude output fell in January, primarily due to turmoil in Venezuela curbing exports, while other members began a scheduled production freeze.

5.2 Crude Price Actions

Market Highlights from the Singapore Window

Brent crude futures opened lower, falling below $68/bbl before rebounding to around $67.80/bbl on resurfacing geopolitical tensions. The prompt market structure saw Mar DFL sell off to $0.75/bbl before recovering. We saw buying interest in the 9-13 Feb window and 2-6 Mar dates, indicating some physical tightness despite the paper sell-off. In the Brent/Dubai market, the spread opened lower at $0.41/bbl but rallied to $0.62/bbl on the back of a stronger Feb/Mar box.

Market Highlights from the European Window

The Apr’26 Brent contract jumped significantly in the afternoon session, moving from around $67.07/bbl to $68.80/bbl as news of potential delays to US-Iran talks broke. Physical markets were active, with trades for Midland, Forties, and Troll pushing the implied physical differential up to 107c. The paper market also strengthened, with buyers lifting CFD contracts across the Feb and Mar strips.

5.3 Naphtha

Synthesis

The naphtha market is characterized by divergent regional trends. In Asia, buying interest remains healthy, with end-users securing cargoes for March delivery, supported by firm cracker run rates despite poor margins. In contrast, the US market is seeing elevated prices due to strong demand for naphtha as a diluent for Venezuelan heavy crude production, which has hit multi-month highs. European markets are relatively balanced, but cracks have shown some strength recently.

Key Themes

Venezuela Demand: US naphtha is increasingly being directed to Venezuela as diluent, tightening the USGC market and supporting prices.

Asian Fundamentals: Supply to Asia is expected to decrease due to weather delays in the Mediterranean and refinery maintenance, potentially supporting prices further.

Petchem Margins: Despite poor ethylene-naphtha spreads, Asian crackers are maintaining run rates, creating a floor for feedstock demand.

5.4 Naphtha Price Actions

Market Highlights from the Singapore Window

The MOPJ flat price traded at $584.25/mt, with the market balanced. Cracks in NWE were better bid, trading up to -$5.30/bbl before softening. The East-West spread saw some selling pressure near the end of the window.

Market Highlights from the European Window

NWE flat price traded at $547.50/mt with the market better offered. Cracks were well bid initially but turned offered late in the window. Spreads were mixed, with the Mar/Apr spread trading slightly stronger.

5.5 LPG/NGLs

Synthesis

The LPG market is heavily influenced by the recent US winter storm, which caused a massive draw in propane inventories and sent domestic prices soaring. This has closed the arbitrage window to Asia, leading to tightness in the Asian market as buyers scramble for alternative supplies. US propane stocks fell by over 6 million barrels, the largest weekly decline since July 2025. In Asia, demand from PDH operators remains a key variable, with some plants facing delays in restarting.

Key Themes

US Inventory Draw: The 6.2 million barrel draw in US propane stocks is a major bullish factor, supporting Mont Belvieu prices.

Arbitrage Closed: High US prices have shut the arbitrage to Asia, forcing Asian buyers to look for regional or Middle Eastern barrels.

Asian Demand: Chinese PDH operators are active in the spot market to cover March requirements, supporting Asian prices.

5.6 LPG/NGLs Price Actions

Market Highlights from the Singapore Window

FEI spreads strengthened, with Feb/Mar trading up to $26/mt. There was real buying interest for March/April FEI from refiners and producers. The prompt arb was weaker due to FEI strength.

Market Highlights from the European Window

LST spreads strengthened, with interest in the March/4Q spread. The prompt arb traded rangebound, but there was buying interest in the 2H LST/NWE arb.

5.7 Gasoline/Mogas

Synthesis

The gasoline market is grappling with high inventories in the US, which have reached a five-year high. However, regional tightness is evident in the New York Harbor market due to weather-related logistics issues. In Asia, the market is rangebound to weaker, with high exports from South Korea offsetting lower Chinese volumes. The European market is seeing some support from open arbitrage opportunities to the Mediterranean and potentially West Africa.

Key Themes

US Oversupply: Record high US gasoline inventories are weighing on the market, although demand has shown some resilience.

Asian Flows: High South Korean exports are a bearish factor for the Asian market, countering the drop in Chinese exports.

Regional Disparities: NY Harbor strength contrasts with Gulf Coast weakness, highlighting logistical bottlenecks.

5.8 Petrochemicals

Synthesis

The petrochemical sector is seeing mixed signals. Polymer prices in Asia have firmed due to higher feedstock costs and futures rallies in China. However, the fundamental demand picture remains weak, with producers facing margin compression. Ethylene prices in Asia have hit multi-year lows due to ample supply, although some buying interest has emerged from Taiwan.

Key Themes

Margin Compression: Naphtha-based producers are losing money, while low-cost ethane producers are gaining market share.

Supply Overhang: A surplus of polyolefins is expected to persist, with capacity rationalization insufficient to offset new additions.

Price Support: Rising upstream costs (crude, naphtha) are providing a floor for polymer prices despite weak demand.

5.9 Macro/Macro Economics

Synthesis

Global markets are focused on central bank policies and geopolitical developments. The US Federal Reserve's decision to hold rates has supported the dollar, while the Yen remains under pressure ahead of elections in Japan. Economic data from the US remains resilient, with the services sector expanding, although labor market momentum is slowing.

Key Themes

Fed Policy: The Fed's patient stance is keeping the dollar firm and weighing on risk assets.

Geopolitics: Tensions in the Middle East and US-China trade relations remain key risks for the global economy.

Currency Volatility: The Yen's weakness and the potential for intervention are major themes in FX markets.