What can you tell us specifically about crude?

This week I wanted to be a little bit different and try and mix crude and freight together somewhat.

Starting off with just a little bit of a layout of what's happening, kind of following on from the everything is happening and nothing is happening at the same time.

So when it comes to flat price, like Brent, we're down slightly where we were from last week.

DLFs are lower, EFS is lower.

On the supply side of things, uh, we had OPEC monthly report come out.

As we expected, Saudi suppliers are down, Iran is down, Russia is down, but as we know, UAE, Iraq, and Kazakhstan has compensated somewhat so.

Yeah.

But anyway, so Jay, what can you tell us about that freight?

Yeah, so I mean, it's been a pretty intense week on freight, especially on the dirty side.

I think let's zoom out into what freight really does, right? So freight, the way I like to think of freight rates is it's a measure for how efficient or how easy it is to move cargo from one place to another.

And we've described in detail what's happened with the pipeline attacks.

We've described that it was a mechanism for a mechanism for a mechanism to solve.

And now that mechanism is going back to where it was before, i.e. flows are now going to have to move through Hormuz to get out for Saudi crude.

And once again, that's extremely expensive and that's extremely inefficient.

What's

What's the story on crude? Why is flat price still below 100?

Yeah, this is the billion dollar question.

I don't have an answer to.

I can talk about all the craziness that's happening, but $100 a barrel, why we're not yet doesn't make sense to me on a physical side.

So let me just give a quick framing.

So what's happening with the spreads? Basically, the East is telling us there's acute prompt tightness right now.

Less so in the West.

They're all increasing.

So we also know that the rerouting of barrels in the East-West Saudi petrol line and UAE Fujairah pipeline is closer to four million barrels per day than the claim of five to seven million barrels per day.

June, by the way, another thing which we saw in the news is that Iran has also reorganized its military, and it looks like they're taking a bit more on offensive stance.

They've said that they are preparing to take actions into the operations enemy territory.

Um, they've promoted some really hard line leaders into senior positions.

So in general, it doesn't look like a diplomatic solution is, uh, being reached anytime soon.

The indications don't look so good at the moment.

It seems like more protracted, more drawn-out crisis.

Finally, diesel and jet exports from Russia, Middle East, and Asia are down one point three million barrels per day and seven hundred KBD year on year respectively.

Tell us.

Yeah, definitely.

Definitely the world is unfortunately becoming a lot scarier.

And some of the things that we pointed out last week as things to keep an eye on, these things have actually transpired.

And I think one of the main things that we mentioned last week, which is now front and center of everyone's focus now is this issue with the Houthis.

So Just to give a quick recap of what the situation is, basically the Houthis have come out and said that they are giving a warning against warships loading at Saudi Arabia's ports.

And this is another level of risk now for the oil industry, for tankers, given how exposed the Red Sea loadings are for the global market.

out in a roundabout

Excuse my French.

Yeah.

I think what you said about the problem growing and growing is interesting, right? Because if we take the discussion back to diesel and the strength of what we're seeing with diesel margins, yes, it's the function of this Russian diesel ban, which has come in.

But I think part of it is also what we've seen with this kind of will they, won't they when it comes to China's product exports, right? So there was this idea prevalent in the market that China's going to really expand on its product exports in July slash August.

And that will really add some relief into the market.

And we saw spreads weaken and cracks weaken a little bit.

But yeah, since all of this has resurfaced with Hormuz, yeah, that really puts that into question.

yeah so yeah because you know we i remember you know when we were talking about just uh or moves being closed we were talking about a necessary demand destruction equivalent to kobe 20 20 20 you know and now we have russian barrels as well so it's a much worse scenario in terms of the demand destruction required,

interesting Felipe

so you talk about positioning but let's talk about positioning in the more physical sense with ships right so there has been a trickle more activity coming through the whole moves but still it's at very very low level so something like 50% non-Iranian oil tankers have transited in May but still that's 10% of pre-existing pre-conflict level so yes a blip higher but in the grand scheme of things it doesn't change the underlying picture and also like another interesting nugget I saw this week was apparently VLCC was beginning to load at Karg Island in Iran for the first time in four weeks so clearly there is an appetite is still there to get oil out but by no means is it free-flowing and by no means is it a quick recovery.

We also hear that hundreds of vessels have reportedly applied to IOGC for safe passage.

Yeah, given the uncertainty around what's happening with peace discussions, the ceasefire deal, until that happens, that doesn't really mean much in the concrete ground.

One of the more interesting things I saw was a story about some Greek owners putting their ships outside of the homers to be ready to pick up cargo if and when the straits open up.

I think this is interesting because it shows... that this kind of thing is being thought about for the first time.

I think previously, if we look back three or four weeks ago, if you would have asked any major ship owner, they would have said, yeah, it's kind of stay away zone.

Jay, can you tell us more about distillates in general? What are you seeing? What are your