5.1 Crude/Brent
The global crude market is currently navigating a period of extreme volatility as geopolitical escalations in the Middle East collide with new supply-side developments [Bloomberg]. Brent crude prices recently dipped below the $101 mark following reports that Iraq has reached a breakthrough deal with Kurdistan to resume oil exports via a pipeline through Turkey, effectively bypassing the bottlenecked Strait of Hormuz [Bloomberg]. This agreement aims to restore a portion of the 3.4 million barrels per day (b/d) of Basrah crude that has been largely offline since traffic through the Strait ground to a near-halt [Argus].
Simultaneously, the conflict between the US-Israeli coalition and Iran has entered a dangerous new phase following the confirmed killing of Ali Larijani, a top security official and key pillar of Iran’s wartime leadership [Bloomberg]. In response to the ongoing blockade, the US military has deployed penetrator munitions against Iranian anti-ship cruise missile sites near the chokepoint to force its reopening [Bloomberg].
Meanwhile, the Trump administration has announced a historic release of 172 million barrels from the Strategic Petroleum Reserve (SPR), structured as an exchange loan to be delivered in April and May and returned through 2028 [Bloomberg]. This massive intervention aims to blunt the "largest supply disruption on record," which the IEA estimates has removed roughly 8 million b/d from global markets [Kitco].
Further supply relief is being sought through the easing of US sanctions on Venezuela, with individual licenses expected for firms like ONGC Videsh and JBS Foods to help rebuild the nation’s decrepit energy infrastructure [Bloomberg]. However, analysts caution that Venezuela can likely only boost production by 300,000 b/d in 2026, which is marginal compared to the current deficit [Bloomberg].
Tensions remain high as Iran intensifies drone strikes on Saudi Arabian oil hubs, launching nearly 100 drones in a single day, the largest barrage since the war began [Bloomberg].
On the production front, Russia’s output rose slightly to 9.32 million b/d in February, though it remains significantly below its OPEC+ quota [Argus]. In Iraq, production has plunged to just 1.4 million b/d, roughly one-third of pre-war levels, as the country struggles to secure safe tanker passage [Bloomberg].
Sentiment is also weighed by the de facto closure of UAE’s Fujairah port following repeated drone strikes that damaged storage tanks and sparked industrial zone fires [Argus].
5.3 Naphtha The naphtha market is witnessing a sharp divergence in trade flows as European buyers aggressively pull in US barrels to compensate for a massive supply vacuum in the East [Argus].
US naphtha exports to Europe have surged in March, with 64,000 tons loaded in the first half of the month already exceeding the full-month totals for January and February [Argus]. This Transatlantic pull is driven by a persistently elevated East-West spread, which recently closed at $79/t, incentivizing the movement of Mediterranean and Algerian cargoes toward the tight Asia-Pacific region [Argus].
The closure of the Strait of Hormuz has essentially cut off access to 2.5 million b/d of Middle Eastern naphtha and condensate feedstocks, leading to widespread force majeure declarations at Asian steam crackers [Argus]. In Japan, open-spec naphtha benchmark prices fell by $22.50/t to a range of $1,002.25–1,061.25/mt, tracking the broader retreat in crude oil futures [RIM]. Despite the price dip, supply/demand fundamentals in Asia remain "acute," prompting trading houses to scramble for arbitrage cargoes from the West [RIM].
Japanese petrochemical giant Tosoh recently announced a delay in the restart of its 493,000 t/year Yokkaichi cracker, citing severe concerns over feedstock availability despite having roughly 20 days of working inventory [Argus].
Meanwhile, European crackers are unlikely to raise run rates before April as they remain locked into negative March margins set by pre-war olefin contracts [Argus]. Demand in Europe has been further dampened by technical issues at crackers in Germany and Poland, leading the IEA to trim European naphtha demand forecasts by 30,000 b/d for the next two months [Argus].
In the US, outright prices for heavy virgin naphtha hit their strongest levels since mid-2022, reaching 235.14 cents/gallon [Argus]. Despite high prices, South Korean refiners are being forced to cap exports to safeguard domestic supply, further tightening the regional balance [Argus].
5.5 LPG/NGLs
The LPG market is experiencing severe supply constraints as exports from the Middle East remain disrupted, though a handful of "special origin" vessels have managed to navigate the Strait of Hormuz [RIM]. At least two VLGCs carrying 44,000mt cargoes from Iran and two from Qatar recently passed the chokepoint, providing minor relief to buyers in South China [RIM].
Despite these trickles, the broader Middle Eastern market remains muted with no spot sellers active for April loading [RIM]. In the US, FOB Gulf Coast propane prices for April delivery lost $28/mt to settle at $624–634/mt, primarily tracking the weakness in upstream crude futures [RIM].
The USGC-to-Far East arbitrage window remains a focal point, with freight rates for Panamax vessels like the "Vega Star" rising to $143/mt on strong chartering interest [RIM].
In India, the government has directed refiners to prioritize LPG production to combat a domestic shortage, a move that is inadvertently reducing the output of high-octane alkylate for the gasoline pool [Argus]. South Korean importer E1 has issued a major buy tender for butane delivery from June to December, reflecting long-term concerns over supply stability [RIM].
In China, PDH plants in East China are reportedly operating normally, but buyers are hesitant to engage in new spot purchases due to the relatively high current market levels [RIM].
The Far East propane swap market saw contracts for March and April lose around $8–10/mt as the "Japan Index" fell to $873/mt [RIM]. Freight rates for the Middle East-to-Far East route have stayed flat at $100/mt, while rates for USGC-to-Northwest Europe have moved up slightly to $83/mt [RIM]. In Saudi Arabia, exports from the Ras Tanura hub were already halted due to facility problems at Juaymah prior to the war's escalation [RIM].
5.7 Gasoline/Mogas
The global gasoline market is bracing for a "perfect storm" as an acute octane squeeze emerges ahead of the northern hemisphere's summer driving season [Argus]. The record surge in the Singapore 95-92 Ron physical spread to $13/bbl highlights the extreme scarcity of premium blending molecules [Argus]. This shortage is driven by the loss of Middle Eastern feedstocks and a wave of refinery run cuts across Asia, with regional cracker operating rates plunging to 54% [Argus].
In Australia, Prime Minister Anthony Albanese has convened an emergency cabinet meeting to address fuel shortage fears sparked by panic buying and supply chain constraints [Argus]. To mitigate the crisis, the Australian government has released 762 million liters of gasoline and gasoil from strategic stockpiles and temporarily relaxed fuel quality standards [Argus]. South Korea has also implemented mandatory export caps and wholesale price controls on gasoline to prioritize domestic availability [Argus].
US retail prices have mirrored this global tightness, with national average gasoline prices hitting $3.72/USG and diesel prices jumping past the $5/USG mark for the first time in over three years [Argus]. Octane-boosting components like alkylate and reformate in the US Gulf Coast have hit two-year highs, with FOB prices reaching $3.28/USG and $3.63/USG respectively [Argus].
In India, Reliance has reportedly cut alkylate production by 50% to focus on domestic LPG needs, removing critical cargoes from the global export market [Argus]. The timing is particularly problematic as refiners transition to summer-grade specifications, which require more high-octane molecules and limit the use of butane [Argus]. Despite seasonally high stocks in the US, the war-driven volatility in futures markets continues to push pump prices higher, raising significant inflation concerns for central bankers [Argus, Bloomberg].
5.8 Petrochemicals
The Asian petrochemical sector is facing a period of intense pressure, though China’s industry has demonstrated "notable stability" by becoming a temporary exporter of key polymers [Argus].
While Southeast Asian cracker operating rates have collapsed to 54%, Chinese producers have maintained runs at around 90%, utilizing feedstock flexibility to buffer against Middle Eastern shocks [Argus].
Despite this relative strength, China’s domestic polyolefin market has seen prices soften, with LDPE film falling to Yuan 10,650–10,700/mt following the dip in benchmark crude [RIM]. Asia-Pacific benzene exports from South Korea fell 19% month-over-month in February as the US arbitrage window remained shut [Platts].
In the aromatics complex, Toluene inventories in East China climbed to their highest level since mid-2024, reaching 62,400 mt, while prices remained rangebound [Platts]. Paraxylene prices in Asia fell by $20/mt tracking upstream naphtha and Brent crude retreats, with CFR Taiwan/China markers settling at $1,274.67/mt [Platts].
The butadiene market remains stable at $2,050/mt CFR China, supported by supply concerns even as rubber futures in China show weakness [Platts]. Ethylene prices in Asia have stayed unchanged at $1,400–1,450/mt, though Formosa Petrochemical is reportedly considering further production cuts depending on naphtha procurement [RIM].
The Asian MTBE market has moved into a sharper backwardation, with FOB Singapore prices falling to $1,134.81/mt despite robust domestic gasoline blending demand in China [Platts].
Propylene discussions have been thin, with prices stabilizing at $1,100/mt CFR China after previous fluctuations [Platts]. Overall, the sector remains vulnerable to "defensive run cuts" if feedstock supply issues persist into April, as integrated polymer margins continue to worsen [Argus].
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