Lukoil effectively no longer able to transport crude via Ukraine

European markets are finally showing signs of physical tightness, in line with our expectations of July-August showing a negative global crude balance of approximately 2.5 Mbd. Backwardation in ICE Brent futures steepened to such an extent that the M1-M2 spread soared to $1.2/bbl, the highest mid-month reading since October 2023. The Dated-to-Frontline spread rose above $1/bbl over the past week, with Brent CFDs firmly backwardated, seeing a robust $0.30/bbl between respective weeks all the way through. Even though Dubai has been recovering from a month of notable malaise in June, the Brent-Dubai EFS spread keeps on widening, too, reaching $2.4/bbl at the time of writing, narrowing down whatever little arbitrage opportunity there was for European grades to move into towards the Asian continent.