Oil ended August on a down note, falling 7% for its worst month in 10, as demand concerns reared their head again after Hurricane Ida forced the closure of U.S. refineries.
Brent Crude futures settled at $72.99 per barrel, down 42 cents, or 0.6%, on the day. For the month, Brent was down 4.4%, for its sharpest monthly drop since May and its worst loss since October.
U.S. West Texas Intermediate oil settled at $68.50 per barrel, down 71 cents, or 1% on the day. For August, WTI fell 7.4%, also marking its largest drop since May and its worst month since October.
Widespread flooding, power outages and debris-strewn roads slowed recovery efforts by energy companies on Tuesday after Hurricane Ida ripped into oil production facilities, ports and refineries. More than two dozen oil vessels were clustered off Louisiana seaports on Tuesday as the U.S. Coast Guard and port operators assessed damages wreaked by Hurricane Ida, according to sources and Refinitiv Eikon data.
China’s demand for spot crude appears to be recovering after nearly five months of slower purchases caused by a shortage of import quotas, drawdowns from high inventories and COVID-19 lockdowns that muted Chinese fuel consumption. Softer buying since April by the world’s top crude importer and a drop in China’s refining output to 14-month lows in July have depressed the prices of staple crude grades from West Africa and Brazil to multi-month lows. But traders and analysts say Chinese importers are now increasing the pace of purchases and paying higher premiums to secure supplies from November onwards as lockdown restrictions ease.
OPEC oil output rose in August to its highest since April 2020, a Reuters survey found, although involuntary losses limited the gain as the group’s top producers further eased supply curbs under a pact with its allies. The group has pumped 26.93 million barrels per day (bpd), the survey found, up 210,000 bpd from July’s estimate. Output has risen every month since June 2020, apart from in February
Indian GDP grew at a record 20.1% YoY for the second quarter of 2021. The remarkable improvement in the June quarter GDP rate, despite the onslaught of the fierce second wave of the pandemic suggests that the country’s economy recovered rapidly after registering negative growth for the first two quarters of 2020-21.
Portfolio managers sold petroleum for the eighth week in 10, but the sales were smaller than before, suggesting the recent bout of profit taking was drawing to a close. Hedge funds and other money managers sold the equivalent of 15 million barrels in the six most important petroleum futures and options contracts in the seven days to Aug. 24.
In common with the pattern since mid-June, the change was primarily driven by selling former bullish long positions (-19 million barrels), rather than initiation of new bearish shorts (which were cut by -4 million barrels). The ratio of bullish long positions to bearish short ones contracted to 4.25:1 (58th percentile) from a peak of 6:06:1 (80th percentile) 10 weeks ago.
api data
The API reported a larger than expected draw in crude stocks. However, it has also disappointingly reported a large build in gasoline stocks. We await official data later today.
At a global level, the death toll from the COVID-19 virus rose to 4.53 Million (+9,006 DoD) yesterday. The total number of active cases rose by 100,000 DoD to 18.72 million. (Click here for details).
Asia’s naphtha crack fell on Tuesday hitting a two-month low, while the market flipped into backwardation with the prompt inter-month spread at $0.25 a tonne.
The crack dipped to $116.13 per tonne from $119.95 in the previous session.
The September crack is lower at $3.65 / bbl.
Asia’s gasoline crack touched a two-month low after crude oil prices came under pressure over worries power outages and flooding in Louisiana triggered by Hurricane Ida will cut crude demand from refineries.
The crack dropped to $6.12 a barrel from $6.66 in the last session.
The September crack is lower at $9.00 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash differentials for gasoil with 10 ppm sulphur inched rose by 2 cents to a premium of 11 cents per barrel to Singapore quotes on Tuesday.
Asian refining profit margins for 10 ppm gasoil dipped on Monday, weighed down by lacklustre regional demand, but traders were hopeful arbitrage demand from Europe would cap any major downside in the near term. Despite weaker raw material crude prices, refining margins for 10 ppm gasoil fell 10 cents to $8.90 per barrel over Dubai crude during Asian trading hours.
With the gasoil EFS trading around -$34 / MT on Monday, the arbitrage to the west should be workable.
Cash differentials for jet fuel narrowed to a discount of 5 cents per barrel to Singapore quotes yesterday 6 cents higher than the previous day.
Asian jet fuel refining margins dropped on Monday due to sluggish aviation demand in the region, while the Sept/Oct time spread for the fuel remained unchanged in a narrow backwardation. Refining margins or cracks for jet fuel slipped to $6.46 per barrel over Dubai crude during Asian trading hours on Tuesday, down from $6.65 per barrel a day earlier.
The front month time spread for the aviation fuel in Singapore , which flipped into a backwardated structure last week, traded at 4 cents per barrel on Tuesday.
The September crack for 500 ppm Gasoil is lower at $7.15 /bbl with the 10 ppm crack at $ 8.95 /bbl. The regrade is at -$ 0.55 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Cash premiums for cargoes of Asia’s 180-cst high-sulphur fuel oil (HSFO) extended losses on Tuesday, falling away from a near eight-month high on Friday amid a weaker deal values and lower supplier offers.
The cash premium fell to $9.89 a tonne to Singapore quotes, down from $13.44 a tonne on Monday and $20.48 a tonne on Friday, the highest since early January.
The front-month time spreads of both 180-cst HSFO and 380-cst HSFO were bid higher to near two-year highs of $16.50 per tonne and $14.50 per tonne, respectively, Refinitiv data showed. The front-month 380-cst HSFO barge crack was also bid up to a near three-month high of $9.78 a barrel, the data showed.
Fuel oil stocks in ARA fell 50,000 tonnes to 1.2 million tonnes in the week ended Aug. 26, data from Dutch consultancy Insights Global (IG) showed. Compared with last year, however, the ARA inventories were 9% higher and on par with the five-year seasonal average of 1.18 million tonnes
The September crack for 180 cst FO is lower at -$2.00 /bbl with the visco spread at $2.05 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
No fresh trades for today.
Hedge recommendations are essentially made for refiners. These are not trading positions as such. The rationale of these positions is to lock in extraordinary levels for the refinery.
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About this blog
This blog post attempts to give a top level summary of the Singapore market goings on to a person who seeks to obtain a directional sense of the market on a daily basis.