Oil prices recovered from 3-month lows on Wednesday in anticipation of supportive action from OPEC, before closing lower for a fifth time in six days after the United States announced its first Omicron case of Covid.
Brent crude futures settled down 36 cents, or 0.5%, at $68.87 per barrel. Brent has lost 16% since its last positive close of $82.31 a week ago. It is also down 21% from its seven-year high of $86.70 attained in mid-October.
WTI crude futures settled down 61 cents, or almost 1%, at $65.57 per barrel, after rebounding to $69.49 earlier in the session. WTI has lost almost 17% since its last positive close of $78.50 on Nov. 23. It is also down more than 23% from the seven-year high of $85.41 notched in mid-October.
“When the markets gets hit with news about Frankenstein variants, you’re selling and asking questions later,” said John Kilduff, partner at Again Capital LLC in New York, said he expects more bullish momentum to return whenever WTI crosses above $70 a barrel.
“The speculator community is running the show here,” Robert Yawger, director of energy futures at Mizuho, said. (We like the way people reason, it is demand when the prices rise in a steep line and speculation when they dive down).
OPEC+ is likely to make its decision on Thursday on whether to continue with its planned course of adding 400 kbd per month. Several OPEC+ ministers have said there is no need to change course. But even if OPEC+ agrees to go ahead with its planned supply increase in January, producers may struggle to add that much.
It is unclear if the OPEC+ group, which is meeting today, will put on hold plans to add 400,000 barrels per day (bpd) to supply in January. The group was already weighing the effects of last week’s announcement by the United States and other countries to release emergency crude reserves to temper energy prices.
The DOE data showed a lower draw for crude stocks than was expected, while both gasoline and distillate stocks grew more than expected. There are, as usual discrepancies with the Material Balance statement as shown below.
Disappointing from the point of view of bulls was the significant deterioration in gasoline demand to 8.97 mbpd. Distillate demand also dropped marginally to 4.21 mbpd.
Asia’s naphtha crack dropped to $146.78 a tonne, down from Tuesday’s two-week high of $157.70 per tonne.
While the naphtha crack has come under pressure from limited blending economics, limited arbitrage supplies and steady petrochemicals demand were expected to provide support.
The December crack is lower at $ 3.85/bbl.
The January crack is at $ 4.05 /bbl.
Asia’s gasoline crack edged up on Wednesday to hit a more than one-week high, extending gains even as crude oil prices climbed.
But its outlook was clouded by fears of renewed travel restrictions and rising near-term gasoline output.
Light distillate stocks in Fujairah were marginally higher for the week ended 29 Novmber at 4.31 million barrels according to data reported by S&P Global Platts on Wednesday.
The December crack is higher at $9.60/ bbl.
The January crack is at $10.10/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash differentials for gasoil with 10 ppm sulphur content were 5 cents lower at a premium of 20 cents per barrel over Singapore quotes.
Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 33.5% to 1.9 million barrels in the week ended Nov. 29, data via S&P Global Platts showed.
Refining margins for 10 ppm gasoil climbed to $9.82 a barrel over Dubai crude during Asian trading hours, compared with Friday’s $9.45 per barrel, which was the lowest since Sept. 9.
Asia’s cash premiums for jet fuel rose on Wednesday, after the Dec/Jan time spread for the aviation fuel in Singapore widened its backwardated structure.
Cash differentials for Jet rose by 9 cents to a premium of 44 cents over Singapore quotes. The Dec-Jan spread traded at -20 cents per barrel.
Refining margins or cracks for jet fuel climbed to $8.63 per barrel over Dubai crude during Asian trading hours, compared with $7.10 per barrel a day earlier.
The December crack for 500 ppm Gasoil is higher at $9.50/bbl with the 10 ppm crack at $10.50 /bbl. The regrade is at -$0.55 /bbl.
The January crack for 500 ppm Gasoil is at $10.35/bbl with the 10 ppm crack at $11.35 /bbl. The regrade is at -$0.50 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s 0.5% very low-sulphur fuel oil (VLSFO) cash differential extended gains for a tenth straight session on Wednesday to a fresh two-year high amid firm demand and persistently tight near-term supplies.
The VLSFO cash premium climbed to $22.23 a tonne to Singapore quotes on Wednesday, up from $21.80 a tonne in the previous session. The cash differential was last higher in early-February 2020 following the introduction of the global sulphur cap at the start of the year that sent the differential to a record $30 per tonne to Singapore quotes.
By contrast, weak demand sent the 380-cst high-sulphur fuel oil (HSFO) cash premium to 30 cents a tonne on Wednesday as suppliers dropped their offers to help stimulate demand.
Fujairah Oil Industry Zone inventories for heavy distillates and residues jumped by 2.75 million barrels, or about 433,000 tonnes, to 11.91 million barrels, or 1.88 million tonnes, data via S&P Global Platts showed. Fujairah’s fuel oil inventories were 38% higher than year-ago levels.
The December crack for 180 cst FO is higher at -$6.65 /bbl with the visco spread at $1.40 /bbl.
The January crack for 180 cst FO is at -$5.55 /bbl with the visco spread at $1.35 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
No Fresh trades today. However, we would like to take the opportunity to highlight the reason for risk management today. We had some time ago recommened hedging gasoil cracks in excess of $15.00/barrel. Those who had done similar trades would be really grateful for their sagacity.
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.
Click Here to see how all our recommendations have fared
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.