Crude OilNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices settled lower on Wednesday after sliding more than $3 a barrel in the session after U.S. government data showed big builds in crude oil, gasoline and distillate inventories and OPEC and its allies stuck to their output policy.

London-traded Brent crude for March delivery settled down $2.62, or 3%,at $82.84, after an intraday bottom at $82.39.

New York-traded WTI crude for March settled down $2.46, or 3.1%, at $76.41 per barrel. The session low was $76.06.

Ministers from the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia kept their output policy unchanged on Wednesday.

OPEC’s oil output fell in January, as Iraqi exports dropped and Nigerian output did not recover, with the 10 OPEC members pumping 920,000 barrels per day (bpd) below OPEC+ targeted volumes, a Reuters survey found. The shortfall was bigger than the 780,000 bpd deficit in December.

On the supportive side, China’s factory activity shrank more slowly in January than in the previous month thanks to the end of the country’s zero-COVID policy, though infections among workers still hampered production, a private sector survey showed on Wednesday.

The Federal Reserve raised its target interest rate by a quarter of a percentage point on Wednesday, yet continued to promise “ongoing increases” in borrowing costs as part of its still unresolved battle against inflation. “Inflation has eased somewhat but remains elevated,” the U.S. central bank said in a statement that marked an explicit acknowledgement of the progress made in lowering the pace of price increases from the 40-year highs hit last year.

DOE Data

The DOE data has shown sizeable stock builds in both crude and products. Crude stocks received a double whammy from rising imports and falling exports that do not quite appear to have reflected fully in the stock data according to our Material Balance Statement.

Gasoline stocks have risen notwithstanding a sizeable build in demand for gasoline. Having said that, they remain at their lowest levels for the last 10 years, this level having last been seen in 2014. Distillate stocks also narrate the same story. However, the drop in distillate demand could be suggesting a milder winter.

Asia’s naphtha refining profit margin rose by $3.25 to $65.88 a tonne over Brent crude on Wednesday.

The February crack is lower at -$ 4.45 per barrel 

Asia’s gasoline markets inched higher on Wednesday as Fujairah stocks fell, but gains remained capped amid little buying interest at the Singapore window and a rise in U.S. stocks.

Asia’s refining profit margin for gasoline rose by 10 cents to $13.00 a barrel over Brent crude.

The February crack is lower at $15.10 per barrel.

Click Here for a graphical depiction of Global Gasoline stocks by region.

Asia’s 10-ppm sulphur gasoil cash premiums rebounded on Wednesday, as firm buying interest from a China major remained for mid-February parcels.

Cash differentials for 10 ppm gasoil stood at a premium of $2.95 a barrel to Singapore quotes, up from $2.89 in the previous session.

March and April cargoes were being snapped up under private discussions as well by the same buyer, with some participants believing there could be location swap demand present for arbitrage trade.

Refining margins for 10 ppm gasoil, however, fell to around $31.00 per barrel.

Cash differentials for jet rose to a premium of $2.65 a barrel to Singapore quotes, up from $ 2,40 a barrel in the previous session.

Refining margins for jet trended lower and at a faster pace to $30.32 a barrel.

Stocks of middle distillates at Fujairah Oil Industry Zone hit an eight-month low at 2.333 million barrels for the week ended Jan. 30, according to industry information service S&P Global Commodity Insights.

The February crack for 10 ppm Gasoil is lower at $30.75 /bbl. The 10 ppm regrade is at $0.10 /bbl.

Click Here for a graphical depiction of Global Distillate stocks by region.

The spot cash premium for 0.5% very low sulphur fuel oil (VLSFO) surged to a six-month high on Wednesday as the product traded at a higher value for end February to early March loading.

The 0.5% VLSFO cash differential rose to a premium of $28.40 a tonne on Wednesday, while the market’s front-month crack climbed to $14.16 a barrel at the Asia close (0830 GMT).

However, downstream bunker fuel premiums were lagging in recovery as overall prompt supplies remained ample. Premiums for delivered 0.5% VLSFO bunker fuel were in the range of $30-35 earlier this week, according to traders.

Residual fuel oil stocks at Fujairah dipped 2% to 9.71 million barrels (1.53 million tonnes) in the week ended Jan. 30, showed data from the Fujairah Oil Industry Zone published by industry information service S&P Global Commodity Insights.

The February crack for 180 cst FO is lower at – $20.00 /bbl with the visco spread at $1.50 /bbl.

Click Here for a graphical depiction of Fuel Oil stocks by region.

Since we are resuming coverage after a long while, a couple of lines here today. Gasoline cracks have been running really strong and we have laid on hedges as shown above (we have been tracking markets even though we have not been posting a commentary on the same). Gasoil cracks continue to be strong, though not having the strength shown 6 months ago. We will continue to monitor both and report regularly

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.

Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity

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