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Crude prices fell 2% on Friday as trading for 2021 ended, but the year remained a banner one for oil bulls as output cuts by OPEC+ delivered the biggest rally since 2016 despite threats from Covid variants.
Brent crude futures slid $1.68, or 1.8%, to $77.78 per barrel. For the month, Brent rose 11%, while for the year, it gained 51%. That was Brent’s biggest rally since 2016.
WTI crude futures settled down $1.78, or 2.3%, at $75.21 per barrel. For December itself, WTI was up 14%. For the year, WTI was up 55%, its most since 2009.
The final weeks of December are typically strong periods for gasoline and diesel consumption in the United States as people take to the road for Christmas, New Year and holiday travels. Trucking activity is also heavy at this time of year due to seasonal gift deliveries.
Friday’s dip was more of profit taking and year-end book squaring after a week of substantive gains that saw WTI rising from the pre-Christmas low of $72.27 to the current session high of $77.06, said John Kilduff, founding partner at Again Capital, an energy hedge fund in New York.
The 23-nation OPEC+, led by Saudi Arabia and Russia, meets on Jan. 4 to confirm a 400,000 barrels-per-day increase in output for February if it deems market conditions appropriate. On Thursday, Saudi King Salman called on all oil producers to stick with the alliance’s output caps and recommendations to ensure market stability.
Negotiators from Iran and five world powers resumed negotiations on Monday in a bid to restore Iran’s landmark 2015 nuclear deal. In the 2015 deal, five world powers, namely the UK, France, Germany, the U.S., Russia and China, granted Iran sanctions relief in exchange for curbs on its nuclear program before the Trump administration scuttled the deal and reinstated sanctions in 2018.
Baker Hughes data on Friday afternoon showed the U.S. weekly active oil-rig count standing pat at 586. Oil rigs were steady at 480 and those rigs drilling for natural gas held at 106, according to the companies data. For the year, rigs are up 235, with those drilling for oil increasing by 213 and gas rigs up by 23..
At a global level, the death toll from the COVID-19 virus rose to 5.46 Million (+2,951 DoD) yesterday. The total number of active cases rose by 470,000 DoD to 30.62 million. (Click here for details).
Data on Friday showed the United States averaging 316,000 new cases a day, up nearly fourfold from a month ago. But the data did not determine how many of those infected were unvaccinated. Separately, CDC data shows that more than 61% of the total US population is fully vaccinated, and over 32% of fully vaccinated adults have received a booster.
Asia’s naphtha crack naphtha crack rose to $164.35 a tonne on Friday, up $4.77 from last close.
“Naphtha gained some support from higher LPG prices which were trading at a premium of $80 per barrel, keeping petrochemical producers away from using LPG as feedstock for cracking,” said Mohammed Yasser, analyst at Refinitiv Oil Research.
Naphtha margins have gained nearly 61% this year, as it remained the dominant raw material choice for petrochemical crackers.
The January crack is higher at $ 5.10 /bbl.
Asia’s gasoline crack traded steadily above $11 a barrel as economic recovery across the globe from a pandemic-led slump boosted demand, even as Omicron coronavirus variant cases surge worldwide. The crack settled unchanged at $11.14 per barrel.
The January crack is higher at $13.65/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash premiums for gasoil with 10 ppm sulphur content fell by 2 cents to 87 cents per barrel to Singapore quotes
Cracks for 10 ppm gasoil dipped to $12.83 a barrel over Dubai crude, down from $12.98 a barrel in the previous session.
Asian refining margins for jet fuel posted their steepest yearly gain on record on Friday, but traders and analysts believe it would likely take until the middle of this decade for aviation demand to return to pre-COVID levels.
Lacklustre international tourism and frail business travel in the wake of the Omicron variant of the coronavirus would weigh on the jet fuel market in coming days, market watchers said.
Cash differentials for jet fuel flipped into negative territory for the first time since Oct. 18 on Friday to be at a discount of 9 cents per barrel to Singapore quotes. They were at a 1-cent premium on Thursday.
Refining profit margins, also known as cracks, for jet fuel slipped 59 cents to $10.66 per barrel over Dubai crude during Asian trading hours on the last day of 2021.
The jet cracks, which have gained a record 127% this year shrugging off the worst throes of the pandemic, have averaged $6.91 per barrel this year, compared with $3.02 a barrel in 2020, and $14.96 per barrel in pre-pandemic 2019, Refinitiv Eikon data showed.
The January crack for 500 ppm Gasoil is lower at $11.70 /bbl with the 10 ppm crack at $12.70 /bbl. The regrade is at -$1.80 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s front-month crack for 0.5% very low-sulphur fuel oil (VLSFO) eased on Friday after five straight sessions of gains, but steady regional demand and tight supplies kept it within striking distance of its strongest level since February 2020.
The front-month VLSFO crack was at $17.05 per barrel against Dubai crude during Asian trade, down from a multi-month high of $17.84 a barrel hit in the previous session. The crack, however, has gained about 54% this year. The VLSFO crack has averaged $12.83 per barrel this year, 21% higher from an average of $10.59 in 2020, Refinitiv data showed.
Cash differentials for Asia’s 0.5% VLSFO , which have surged during the fourth quarter of 2021, were at a premium of $15.75 a tonne to Singapore quotes on Friday, compared with $16.66 per tonne on Thursday.
Meanwhile, Asia’s cash differentials for 380-cst high sulphur fuel oil (HSFO) flipped to a discount of 17 cents per tonne to Singapore quotes on Friday, compared with a premium of 16 cents a tonne in the previous session.
The front-month 380-cst HSFO barge crack dropped on Friday to trade at a discount of $11.87 a barrel to Brent, Refinitiv data showed. The barge crack has averaged minus $10.06 per barrel this year, compared with an average of minus $8.74 in 2020.
The January crack for 180 cst FO is higher at -$6.05 /bbl with the visco spread at $1.45 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
No fresh trades 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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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.