Oil-to-gas switching still not materialising

Crude prices remained supported by the rest of the commodity complex, with the White House urging OPEC+ nations to increase their output. Since last Friday, the US crude market witnessed heightened volatility, as the prompt WTI time spread spiked from 60 cents to 110 cents intraday, without clear fundamental drivers, which pushed WTI prices above 81 $/b for a brief period. We continue to document the potential oil-to-gas switching potential by looking at demand from refiners for heavy sweet crudes, which yields a high percentage of low sulphur fuel oil, particularly adapted for powerplants in India, Pakistan, Bangladesh and Japan to a lesser extent (due to sulphur content limits). The discounts for these crudes did not move in line with the narrative of a high oil-to-gas switch, with Dar Blend, a Sudanese heavy sweet crude trading at 50 cents below Dated Brent for November loading. Still, Pakistan consumed a hefty level of fuel oil in its power sector in August, close to 100 kb/d, but it should ease, as winter demand is less intense.