Oil prices again scaled mid-2014 peaks after OPEC+ did little on Wednesday to offset the energy supply crisis heightened by Western sanctions on major oil producer Russia for the war in Ukraine.
Brent crude futures settled up $7.96, or 7.6%, at $112.93 a barrel. Its intraday peak of $113.93 was the highest since June 2014.
WTI crude futures settled up $7.19, or 7%, at $110.60 a barrel.on its front month. WTI hit $112.47 earlier in the session, its highest since May 2011.
OPEC+, chaired by Saudi Arabia with the assistance of Russia, authorized the 23 oil producing countries in the alliance to increase output by a total of 400,000 barrels per day in April. It’s a quantum the group had stuck to for the past nine months. But it’s also an aspiration it has barely met, either due to production constraints at under-invested oil wells or a deliberate miss of the target — especially on the part of the Saudis — to ensure the oil rally doesn’t get short-circuited in any way. WTI has risen 45% this year alone while Brent has gained 43%.
Prices were also spurred by across the board draws in US stocks.
While stocks have dipped across the board, Of particular concern were inventory levels at the Cushing, Oklahoma delivery point for WTI which showed a critically-low balance of 22.8 million barrels versus the period week’s level of 23.8 million.
Prior to the past four weeks, gasoline saw builds of around 37,000 barrels in the preceding eight weeks, indicating weaker demand. Distillates, which are refined into diesel for trucks, buses, trains and ships as well as fuel for jets, have been the strongest growth component of the US oil complex for months, seeing non-stop inventory declines since mid-January.
The material balance statement shows something fairly startling.
If we take into account the drop in imports along with the rise in exports, the expected crude draw is of the order of 16 Million barrels!
Certainly calls for interesting times ahead.
At a global level, the death toll from the COVID-19 virus rose to 5.99 Million (+7,733 DoD) yesterday. The total number of active cases fell by 300,000 DoD to 61.32 million. (Click here for details).
Asia’s naphtha refining margins jumped to a fresh peak on Wednesday, as prices soared over supply disruption fears from the Russian invasion on Ukraine.
The crack surged to $257.20 per tonne from $212.15 in the last session, and the spread between second-half April and second-half May widened in backwardation to a record $46.75 a tonne, Refinitiv data showed.
“Black Sea naphtha is a heavy grade that Asian petrochemical buyers take, so premiums for heavy naphtha versus the flat price, and open-spec naphtha have risen quite sharply,” Joseph McDonnell, analyst at Energy Aspects said.
The March crack is lower at $6.25 per barrel. The April crack, however, has jumped to $ 8.82 per barrel
Asia’s gasoline crack rose by 4 cents to $11.16 a barrel.
The March crack has dropped to 12.55 /bbl. The April crack has risen to $17.45 per barrel.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash premiums for 10 ppm gasoil jumped on Wednesday, surging to a multi-year high, riding on firmer deals in the physical trade window.
Cash differentials for gasoil with 10 ppm sulphur content rose to a premium of $2.89 a barrel to Singapore quotes, a level not seen since Singapore’s benchmark gasoil grade was shifted to 10ppm in January 2018, from 500ppm earlier.
Cash premiums for jet fuel dipped 5 cents to $1.61 a barrel to Singapore quotes on Wednesday, but traders were hopeful about recovering aviation demand as airlines across the globe were increasing capacity.
Refining margins for jet fuel were at $15.42 a barrel over Dubai crude during Asian trading hours, down from $16.04 per barrel on Tuesday. The cracks, however, have jumped over 17% in the last week.
Global airline capacity rose 1.1% this week to 82.1 million seats, according to aviation data firm OAG.
Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 4.5% to 2.5 million barrels in the week ended Feb. 28, data via S&P Global Platts showed.
The March crack for 500 ppm Gasoil has jumped to $21.25 /bbl with the 10 ppm crack at $22.25 /bbl. The regrade is at -$8.10 /bbl.
The April crack for 500 ppm Gasoil has jumped to $22.75 /bbl with the 10 ppm crack at $23.75 /bbl. The regrade is at -$5.10 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s cash premiums for 0.5% very low-sulphur fuel oil (VLSFO) climbed for a fifth straight session on Wednesday, lifted by active buying interest for physical cargoes amid limited supplies.
Cash premiums for Asia’s 0.5% VLSFO rose to $19.91 a tonne to Singapore quotes, a level not seen since Dec. 6. They were at $18.40 per tonne a day earlier.
The March/April VLSFO time spread widened to $26.50 a tonne on Wednesday, compared with $24.75 a tonne on Tuesday.
The front-month VLSFO crack jumped to $24.67 per barrel against Dubai crude during Asian trading hours, a fresh high since January 2020. The crack was at $22.35 per barrel on Tuesday.
The 380-cst HSFO barge crack for April traded at a discount of $21.01 barrel to Brent on Wednesday, while cash premiums for 380-cst high sulphur fuel oil (HSFO) rose to $1.30 per tonne to Singapore quotes.
The March crack for 180 cst FO has tanked to -$16.35 /bbl with the visco spread at $2.05 /bbl.
The April crack for 180 cst FO is at -$10.15 /bbl with the visco spread at $2.05 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
In line with our strategy yesterday, we will hedge Naphtha Dubai for 2Q22 at current levels of $ 7.90 per barrel. We will also hedge 10ppm Gasoil Dubai for April 22, May 22, 3Q22 and 4Q22 at present levels of $23.75, $21.30, 17.55, and 16.95 respectively. We will add a hedge of Gasoline Dubai for 2Q22 at current levels of $18.40 per barrel
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.