Oil markets settled at 7-1/2 year highs on Tuesday after ceasefire negotiations between Russian and Ukraine forces failed, and traders worried that international sanctions against Moscow would lead to an implosion of exports from a country that is at the heart of global energy supply.
Brent crude futures settled up $3.98, or 4%, at $104.97 a barrel for its highest closing since August 2014. It spiked to as high as $107.97 during the session, also marking a 7-½ year peak.
WTI crude futures settled up $7.69, or 8%, at $103.41 a barrel on its front month. WTI hit an intraday $106.75 during the session, also its highest since 2014.
Tuesday’s run-up in oil prices came despite the Paris-based International Energy Agency announcing the coordinated release of 60 million barrels from the emergency reserves of consuming countries to provide some relief to the 31 nations on its membership.
The West had taken pains initially not to target Moscow’s energy exports with sanctions due to its own reliance on Russians oil and gas. But over the weekend, that mindset clearly changed, with EU officials affirming on Monday their plan to wean the bloc from its dependence on Russian energy, while being prepared to suffer in the short-term from spiraling oil and gas costs due to that decision.
As Russia is getting squeezed out of the SWIFT network, trade finance options are also drying up for Russian crude. Traders are preferring to avoid purchase of Russian crude notwithstanding the absence of sanctions.
Top oil exporter Saudi Arabia may sharply hike prices of crude for Asia in April, trade sources said on Wednesday, with differentials for most grades hitting all-time highs as global supplies tighten over financing and shipping issues from sanctions on Russia.
| MARCH | Change | est.APRIL | |
| Arab Extra Light | 3.6 | 1.7/2.35 | 5.3/5.95 |
| Arab Light | 2.8 | 1.5/2.2 | 4.3/5 |
| Arab Medium | 2.75 | 1.15/2.1 | 3.9/4.85 |
| Arab Heavy | 1.4 | 0.7/2.1 | 2.1/3.5 |
At a global level, the death toll from the COVID-19 virus rose to 5.98 Million (+7,191 DoD) yesterday. The number of daily deaths crossed 10,000 after a very long period. The total number of active cases fell by 1.08 Million DoD to 61.62 million. (Click here for details).
Asia’s naphtha surged to a record high on Tuesday, as market players anticipated supply disruption from Russia amid Ukraine crisis.
The crack jumped to $212.15 per tonne, up $35.88 from Monday’s close, and the inter-month time spread jumped to $37.50 a tonne, the highest since August 2013.
Naphtha inflows from the top supplier Middle East contracted by 16% in February month-on-month to a one-year low of 2.6-2.7 million tonnes due to planned maintenance at refineries, according to assessments by Refinitiv Oil Research.
The March crack has jumped to $6.35 per barrel.
Asia’s gasoline crack dipped by 15 cents to $11.12 a barrel.
The March crack is lower at 14.30 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash differentials for gasoil with 10 ppm sulphur content were at a premium of $2.27 a barrel to Singapore quotes, 21 cents higher from a day earlier.
Asian jet fuel refining margins rose on Tuesday, despite firmer feedstock crude prices, buoyed by a gradually recovering aviation demand.
Cash premiums for jet fuel rose to a two-week high of $1.66 a barrel to Singapore quotes on Tuesday, compared with a premium of $1.31 per barrel on Monday.
The March/April time spread widened its backwardated structure on Tuesday to trade at $2.13 per barrel, compared with $1.91 a barrel on Monday.
Refining profit margins, or cracks, for jet fuel jumped to $16.04 a barrel over Dubai crude during Asian trading hours, their strongest in three weeks. They were at $14.23 per barrel a day earlier.
The March crack for 500 ppm Gasoil has jumped to $19.20 /bbl with the 10 ppm crack at $20.20 /bbl. The regrade is at -$3.55 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s cash differentials for 180-cst high-sulphur fuel oil (HSFO) flipped to a premium on Tuesday, rising to their strongest level in four weeks, lifted by a firmer deal in the physical trade window. The cash differentials for 180-cst HSFO were at a premium of $1.27 a tonne to Singapore quotes, the highest since Jan. 31. They were at a discount of 15 cents per tonne a day earlier.
Asia’s cash premium differentials for 380-cst HSFO rose for a second consecutive session to 92 cents per tonne to Singapore quotes, up 20 cents from a day earlier, while the front-month 380-cst HSFO barge crack traded at a discount of $14.61 a barrel to Brent on Tuesday.
Cash premiums for Asia’s 0.5% VLSFO climbed to $18.40 a tonne to Singapore quotes on Tuesday, the highest since Dec. 23 last year. They were at $17.78 per tonne on Monday.
The front-month VLSFO crack slipped 8 cents to $22.35 a barrel against Dubai crude during Asian trading hours on Tuesday.
The February crack for 180 cst FO has tanked to -$13.80 /bbl with the visco spread at $1.90 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
We hedge Naphtha Dubai for 2Q22 at current levels of $ 6.75 per barrel. We will also hedge 10ppm Gasoil Dubai for April and May 22 at present levels of $22.15 and $20.65 respectively.
It is possible that such hedges may bleed in the immediate future. The issue with this period is that the moment the war turns around, we will see levels collapse. If levels rise, we will continue to hedge every significant rise.
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.