5.1 Crude/Brent
Synthesis
Crude oil markets have trended lower, with prices for both Brent and WTI under pressure as the International Energy Agency (IEA) issued a bearish report highlighting weak demand growth and swelling global inventories. The IEA slashed its 2026 global oil demand growth forecast, citing a significant slowdown in Chinese consumption and the rapid electrification of the transport sector. This bearish outlook was compounded by data showing that global oil stockpiles surged in 2025 by the most since the pandemic year of 2020, signaling a well-supplied market. Prices were further weighed down by the prospect of rising non-OPEC+ production, which the IEA expects to outpace demand growth, leading to a substantial market surplus throughout the year. Despite the bearish fundamentals, geopolitical tensions continue to provide a floor for prices, with traders monitoring developments in the Middle East and potential supply disruptions in Venezuela. The physical market is also seeing some softness, with differentials for key grades like WTI Midland easing as refinery maintenance season approaches in the US and Europe.
Key Themes
IEA Bearish Outlook: The IEA's report is the dominant theme, forecasting a persistent supply surplus in 2026 due to slowing demand growth and robust non-OPEC+ output. The agency highlights that the post-pandemic rebound in oil demand has largely run its course.
Inventory Build: Global oil inventories rose significantly in 2025, and the IEA warns that stocks could continue to build in 2026 unless OPEC+ deepens its production cuts. This inventory overhang is a major headwind for prices.
Chinese Slowdown: The IEA specifically pointed to weaker-than-expected demand in China as a key driver of its downward revision, raising concerns about the health of the world's largest oil importer.
Geopolitics: While fundamentals are bearish, geopolitical risks remain a wildcard, with ongoing tensions in the Middle East keeping traders cautious about potential supply shocks.
Key Market Drivers:
IEA Report: The agency's monthly report cut demand growth forecasts and highlighted rising inventories, setting a bearish tone for the market.
Non-OPEC+ Supply: Robust production growth from the Americas, particularly the US, Brazil, and Guyana, is expected to satisfy most of the world's incremental oil demand this year.
Refinery Maintenance: Seasonal turnarounds in the US and Europe are reducing crude demand, putting downward pressure on physical differentials.
Supply/Demand Fundamentals:
Inventory Data: The IEA reported a large build in global oil stocks in 2025, the biggest since 2020, signaling a loose market balance.
Refinery Runs: Global refinery throughputs hit a record high in December but are expected to decline seasonally in Q1 2026 due to maintenance.
Chinese Demand: The IEA revised down its forecast for Chinese oil demand growth, citing economic headwinds and the rapid adoption of electric vehicles.
5.2 Crude Price Actions
Market Highlights from the Singapore Window
Trading activity in the Singapore window was subdued, with the market digesting the bearish IEA report. The March Brent/Dubai spread weakened, reflecting the softer sentiment. The market structure for Dubai flattened, with the March/April spread narrowing significantly as prompt demand eased. Buying interest for spot cargoes was thin, with refiners in North Asia adopting a wait-and-see approach ahead of the refinery maintenance season. The Murban OSP differential to Dubai also came under pressure, indicating weaker demand for light sour grades.
Market Highlights from the European Window
In the European window, Dated Brent came under pressure from selling interest in the prompt market. The differential for WTI Midland into Rotterdam weakened, trading at a lower premium to Dated Brent compared to earlier in the week. This weakness was attributed to a buildup of unsold cargoes and lower refinery demand due to upcoming maintenance. Paper market activity was focused on the front of the curve, with selling seen in Contract for Difference (CFD) swaps for late February dates. The Brent futures contract traded lower, testing key support levels as the bearish IEA report weighed on sentiment.
5.3 Naphtha
Synthesis
The naphtha market is facing headwinds from rising inventories in the ARA hub and lackluster demand from the petrochemical sector. Stocks of naphtha in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub have risen, contributing to a sense of oversupply in the European market. This inventory build is partly due to high refinery runs and a lack of export opportunities to the US and Asia. In Asia, the market is also softening, with the IEA noting that petrochemical feedstock demand growth is slowing. However, there are pockets of strength, with some end-users in South Korea and Taiwan still securing cargoes for March delivery to maintain cracker run rates. The arbitrage window from Europe to Asia remains challenging, further trapping barrels in the Atlantic Basin.
Key Themes
ARA Stock Build: Rising naphtha inventories in the key ARA hub are a bearish signal, indicating that supply is outpacing regional demand and export opportunities.
Petchem Slowdown: The IEA's report highlighted slowing growth in petrochemical feedstock demand, which is weighing on naphtha market sentiment globally.
Refinery Runs: High global crude runs in December have boosted naphtha production, contributing to the current supply overhang.
Key Market Drivers:
Inventory Levels: High stocks in ARA are a key weight on European prices and spreads.
Asian Demand: While there is some spot buying, the overall demand growth picture in Asia is moderating, limiting the upside for prices.
Supply/Demand Fundamentals:
ARA Stocks: Inventories in the ARA hub have increased, putting pressure on regional prices.
Cracker Margins: Ethylene production margins remain weak, limiting the ability of petrochemical producers to bid up naphtha feedstock prices.
5.4 Naphtha Price Actions
Market Highlights from the Singapore Window
The Singapore naphtha market weakened in line with the broader energy complex. The MOPJ flat price traded lower, and the crack spread against Brent narrowed. The time spread structure flattened, reflecting the easing of prompt tightness. Buying interest for March delivery cargoes was thinner compared to previous sessions, with buyers bidding at lower levels. The East-West spread narrowed, making the arbitrage from Europe even less attractive.
Market Highlights from the European Window
In Europe, naphtha prices were under pressure from the inventory build in ARA. Crack spreads against Brent weakened, and the market structure moved towards contango for prompt dates. Physical activity was focused on clearing prompt cargoes, with sellers offering discounts to attract buyers. The spread between the front-month and second-month contracts narrowed, indicating a loosening of the prompt market balance.
5.5 LPG/NGLs
Synthesis
The LPG market is mixed, with weakness in the European butane market contrasting with relative stability in propane. In the ARA hub, butane prices have been weighed down by weak demand for gasoline blending and high inventories. Propane, on the other hand, is finding some support from heating demand, although stocks are comfortable. The IEA's report noted that global LPG supply is rising, driven by strong production from the US and the Middle East. This rising supply is keeping a lid on prices despite the winter demand season. In Asia, the market is rangebound, with buyers well-covered for the near term.
Key Themes
Butane Weakness: High stocks and weak blending demand are pressuring butane prices in Europe, leading to a widening discount to propane.
Supply Growth: The IEA highlights robust growth in global LPG supply, which is keeping markets well-supplied and limiting price spikes.
ARA Inventories: Stock levels in the ARA hub are healthy, providing a buffer against any potential supply disruptions.
Key Market Drivers:
Inventory Levels: Comfortable stocks in Europe are dampening price volatility.
Production Growth: Rising output from key producing regions is a structural headwind for prices.
Supply/Demand Fundamentals:
European Stocks: Inventories in the ARA region are stable to rising, particularly for butane.
Heating Demand: While there is some heating demand for propane, it is being met by ample supply.
5.6 LPG/NGLs Price Actions
Market Highlights from the Singapore Window
The Asian LPG market was relatively quiet, with prices drifting lower. The FEI index softened, and the time spreads flattened. Buying interest from Chinese PDH operators was muted, as margins remain under pressure. The spread between propane and butane held steady, with propane continuing to trade at a premium.
Market Highlights from the European Window
In Europe, butane prices fell relative to propane, widening the spread. The arbitrage window for US exports to Europe remains open, but activity is limited by high freight rates. Propane prices were stable, supported by steady heating demand. Trading activity was thin, with market participants awaiting further direction from the US market.
5.7 Gasoline/Mogas
Synthesis
The global gasoline market is showing signs of softness, particularly in the Atlantic Basin. In the US, inventories remain high, and the IEA's report pointed to slowing demand growth for transportation fuels due to efficiency gains and EV adoption. This structural headwind is being felt in the refining sector, where margins for gasoline are under pressure. In Europe, the ARA region is seeing a buildup of gasoline stocks as export opportunities to the US and West Africa remain limited. In Asia, the market is more balanced, but the IEA's downward revision for Chinese demand is a concern for the medium-term outlook.
Key Themes
Demand Headwinds: The IEA's forecast of slowing gasoline demand growth is a key bearish theme, weighing on market sentiment.
Inventory Overhang: High stocks in the US and Europe are keeping a lid on prices and crack spreads.
ARA Stocks: Rising gasoline inventories in the ARA hub are a symptom of the weak export market and lackluster regional demand.
Key Market Drivers:
IEA Forecast: The agency's bearish view on transportation fuel demand is influencing long-term market positioning.
Stock Levels: High inventories in key consuming regions are a major drag on prices.
Supply/Demand Fundamentals:
ARA Stocks: Gasoline inventories in the ARA hub have risen, reflecting the weak export environment.
US Demand: Implied demand in the US is seasonally weak, contributing to the inventory build.
5.8 Petrochemicals
Synthesis
The petrochemical sector remains under pressure from weak margins and oversupply. The IEA's report highlighted that while petrochemicals will be a key driver of future oil demand growth, the pace is slowing. In Europe, the ARA region is seeing high stocks of feedstocks like naphtha and LPG, which is keeping costs relatively low but also signaling weak downstream demand. Ethylene and propylene prices remain depressed, with producers struggling to pass on costs to end-users. In Asia, the market is also challenging, with new capacity additions outpacing demand growth.
Key Themes
Slowing Growth: The IEA notes a deceleration in petrochemical feedstock demand growth, which is bearish for the sector.
Margin Compression: Producers continue to face squeezed margins due to weak product prices and overcapacity.
Inventory Build: High stocks of feedstocks in ARA suggest that cracker run rates are not high enough to absorb available supply.
Key Market Drivers:
Demand Outlook: The slowing global economy and reduced demand for plastics are weighing on the sector.
Capacity Additions: New petrochemical plants coming online in China and elsewhere are exacerbating the oversupply situation.
Supply/Demand Fundamentals:
Feedstock Stocks: High inventories of naphtha and LPG in ARA indicate weak demand from crackers.
Cracker Runs: Operating rates remain under pressure due to poor profitability.
Comments