Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices steadied on Wednesday after OPEC and its allies agreed to stick to their existing policy of gradual oil output increases.

Brent Crude futures fell 4 cents to settle at $71.59 a barrel. U.S. West Texas Intermediate (WTI) crude rose 9 cents to settle at $68.59 a barrel. Brent had plumbed a session low of $70.42 a barrel, while WTI fell as low as $67.12 a barrel.

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.

doe data

The DOE once again reported a huge draw in crude stocks which was not supported by ancillary data. Given that production grew by 100 kbd and utilization dropped by 134 kbd, there should have been a surplus in stocks notwithstanding the decrease of 50 kbd in net imports.

Gasoline demand was more or less constant while distillate demand grew significantly.


At a global level, the death toll from the COVID-19 virus rose to 4.55 Million (+10,493 DoD) yesterday. The total number of active cases rose by 50,000 DoD to 18.69 million
. (Click here for details).

Asia’s naphtha crack gained on Wednesday hitting near two-month high, and the prompt inter-month spread widened in backwardation for a second straight session to $2.25 a tonne.

The crack jumped to $121.73 per tonne, highest since early July, from $116.13 in the last session.

The September crack is lower at $2.75 / bbl.

Asia’s gasoline crack gained on Wednesday after positive consumption data from India boosted market sentiment. However, gains remained limited as Middle Eastern inventories rose for a second consecutive week.

The crack inched higher to $6.63 a barrel from $6.12 in the previous session.

India’s August gasoline sales stayed above the pre-COVID-19 level at 2.4 million tonnes, preliminary sales data from state fuel-retailers showed.

The September crack is lower at $8.70 / bbl.


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

Cash differentials for gasoil with 10 ppm sulphur rose by 8 cents to a premium of 19 cents per barrel to Singapore quotes on Wednesday.

Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 7.2% to a three-week low of 3.7 million barrels in the week ended Aug. 30, data via S&P Global Platts showed.

Cash differentials for jet fuel narrowed by a cent to a discount of 4 cents per barrel to Singapore quotes yesterday.

Asia’s cash discounts for jet fuel narrowed marginally on Wednesday amid a lukewarm uptick in airline capacity from some domestic routes this week, but the overall aviation demand continues to remain under pressure due to prolonged travel restrictions in the region. Refining profit margins for jet fuel, which have gained about 18% in August, rose to $7.01 per barrel over Dubai crude during Asian trade on Wednesday, a level not seen since March last year. They were at $6.46 per barrel on Tuesday

Scheduled seat capacity in India rose by 129,000 seats or 4.5% this week, while flight capacity in China and Australia gained 11.7% and 4.7%, respectively, in the week to Monday, according to aviation data firm OAG. But global airlines in August have removed almost 100 million seats from their schedule for the August-December period with a majority of the capacity reduction driven by the Asia Pacific region, OAG said.

Global air cargo demand, however, provides some support to the struggling industry. The freight demand was up 8.6% in July compared with the corresponding month in pre-pandemic 2019, the International Air Transport Association (IATA) said on Tuesday.

The September crack for 500 ppm Gasoil is higher at $7.40 /bbl with the 10 ppm crack at $ 9.20 /bbl. The regrade is at -$ 0.90 /bbl. 

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

Asia’s front-month 0.5% very low-sulphur fuel oil (VLSFO) crack extended gains on Wednesday, inching higher despite rising crude oil prices on a tighter near-term supply outlook. The front-month VLSFO crack was 8 cents higher to a one-month high $12.47 a tonne above Dubai crude, Refinitiv data showed.

In the high-sulphur fuel oil market, prices for 180-cst HSFO were lower with cash premiums and front-month time spreads continuing their decline from the multi-month highs hit recently.

Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 442,000 barrels, or about 70,000 tonnes, to 8.25 million barrels, or 1.3 million tonnes, data via S&P Global Platts showed.

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.

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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