Europe Product Stock Coverage
Europe is drawing on product stocks and holds nearly 70 million barrels of jet fuel in commercial and strategic storage. That could cover a 300 kb/d shortfall in Gulf-sourced jet supply for several months. Pressure is rising in middle distillates, especially diesel and jet, given Gulf supply to Europe, Africa and Asia. Tightness is also appearing in naphtha for Northeast Asia’s petrochemicals, while reduced LPG shipments from the UAE and Qatar are lifting propane markets. Shut-ins are nearing 7 mb/d and could reach double-digit levels within days. Higher product prices and policy responses are driving rebalancing across global markets. With oil flows through the Strait of Hormuz nearly halted, the immediate response is to anticipate much higher crude prices. Brent crude has already surged past $155 a barrel, its highest level since the brief spike we observed in late 2025. Traders should maintain long positions in crude oil futures and consider buying call options to capitalize on the extreme upward price pressure and rising volatility.Crack Spreads And Refining Margin Trades
The nearly 2 million barrel per day loss in Gulf refining capacity is tightening product markets even faster than crude, creating a major opportunity in refining margins. The 3:2:1 crack spread, a key indicator of refinery profitability, has exploded past $70 a barrel, a level unseen in modern history. We should be aggressively trading this by going long on gasoline and diesel futures while shorting crude oil futures to capture this widening spread. Europe’s inventory cushion is depleting faster than expected, particularly for middle distillates like diesel and jet fuel. Recent Euroilstock data confirmed a 15 million barrel draw in February 2026, the largest monthly drop on record. This signals that long positions in gasoil and jet fuel swaps are likely to become increasingly profitable as the region is forced to bid for replacement barrels on the global market. Tightness is also acute in markets critical for industrial production, particularly naphtha for Asia’s petrochemical sector. Similarly, reduced LPG shipments are causing propane prices to spike, impacting heating and industrial users. This suggests derivative plays on these specific product markets, such as long positions in naphtha swaps against Brent, could offer significant returns. We must also monitor for policy responses, though their impact may be limited given the scale of the disruption. The International Energy Agency is discussing a coordinated release of strategic reserves, but the 17 mb/d shortfall dwarfs the supply disruptions seen during the 1990 Gulf War, which only took about 4.5 mb/d offline. Any announced stock release might create a temporary dip in prices, presenting a new opportunity to buy into the long-term upward trend. Create your live VT Markets account and start trading now.
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