Physical oil markets in Europe are weakening — quashing a rally — as a gush of crude imports from the US head toward a region where refineries are shutting down operations for both planned and unplanned maintenance.
Key contracts for difference, derivatives that traders use to hedge moves in physical North Sea crude prices, have weakened by over $2 a barrel in the space of three weeks. Premiums for several physical grades have hit reverse. Timespreads for Brent futures, which give a sense of supply tightness, have also lost ground.
A record 2.2 million barrels a day of US barrels will be arriving in Europe on tankers this month, according to vessel tracking data compiled by Bloomberg. About a third will be eligible to set the the global benchmark price, Dated Brent.
The influx will reach Europe’s shores at a time when some refineries there have seen their operations curtailed by unexpected halts, while others are set to carry out work during what is normally a fallow period. That means less crude processing.
Exxon Mobil Corp.’s Gravenchon refinery, the larger of its two plants in France, suffered a blaze. The firm’s Rotterdam facility also reported a fire just as maintenance was starting. In Norway, a power fault halted Equinor’s Mongstad refinery last month. There have also been disruptions in Germany and Finland.
Timespreads rallied sharply late last month, prompting hope among some bulls that the underlying market was improving. The reversal…
