Crude OilNaphthaGasolineDisitllatesFuel OilHedge Strategy

Crude prices fell a second day in a row on Tuesday, with market bulls counting on U.S. inventory data due after settlement hours to prop up sentiment deflated by a rash of new Covid infections across the world.

Brent Crude futures settled down 48 cents, or 0.7%, at $72.41 per barrel. On Monday, Brent lost 3.3%. 

WTI settled down 70 cents, or almost 1%, at $71.26 per barrel. That was in addition to Monday’s tumble of 3.6%, which was WTI’s sharpest one-day fall since July 16.

China had largely managed to control the Covid-19 virus since the initial outbreak, helping to underpin a strong economic recovery from the pandemic, greatly contributing to the broader rebound in oil. However, it is now implementing a wave of travel restrictions and quarantine orders at a level not seen since the initial outbreak. Wuhan, where the virus was first reported in 2019, reported three new locally transmitted cases on Monday after more than a year, prompting the authorities to test the city’s 12 million residents amid fears the Delta variant of the virus will quickly take hold.

Bubbling political tensions in the Gulf may, however, help offset the demand concerns. On Tuesday, three maritime security sources clamed Iranian-backed forces seized an oil product tanker off the coast of the United Arab Emirates, though Iran denied the reports.

api data

The API data was a bit of a mixed bag. While it did report a massive gasoline draw, the crude draw was a lot less than expected. Distillates were more or less in line with expectations. As usual, we shall await the official data today.

At a global level, the death toll from the COVID-19 virus rose to 4.26 Million (+9,962 DoD) yesterday. The total number of active cases rose by 190,000 DoD to 15.47 million. (Click here for details).

Asia’s naphtha crack rebounded on Tuesday as robust demand and tighter supplies supported the market. Oil refiners have capped crude processing rates because of weak middle distillates margins, but they have been increasing gasoline yield at the expense of naphtha, traders said.

The naphtha crack slipped to $136.18 a tonne on Tuesday, $2.82 higher than the previous trading day.

“With the spread between naphtha and gasoline in Asia narrowing significantly over the last few weeks and naphtha cracks standing at multi-year highs, we would expect the world’s largest importer of naphtha to prioritise production of the petrochemical feedstock once more,” energy consultancy firm JBC said.

The August crack is higher at $4.15 / bbl

Asia’s gasoline crack dipped 7 cents on Tuesday to $8.69 a barrel.

The August crack is higher at $11.05 / bbl

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

Cash differentials for gasoil with 10 ppm sulphur content were a cent higher at a discount of 1 cent per barrel on Friday.

Cash differentials for jet fuel  were a cent lower at a discount of 20 cents per barrel to Singapore quotes on Tuesday.

Asian refining margins for jet fuel rose on Tuesday, surging to their strongest level in more than 16 months, riding on improved airline capacity in some markets and expectations that wider vaccinations would help boost aviation demand in coming months.

Refining profit margins, or cracks, for jet fuel in Singapore rose 3 cents to $6.75 per barrel over Dubai crude during Asian trading hours, a level last seen in March 2020.

Scheduled capacity for global airlines in July was up 18.5% from June, thanks to “significant recovery in some, but not all, markets,” aviation data firm OAG said in a statement. China’s flight capacity in the week to Monday was 9.7% lower compared with last week, but seat capacity in Japan and India this week climbed 11.6% and 6.7% respectively, OAG data showed.

Despite persistent border restrictions, the Asian jet fuel market is bolstered by steady arbitrage demand from the U.S. and Europe, trade sources said.

The August crack for 500 ppm Gasoil is higher at $6.15 /bbl with the 10 ppm crack at $ 7.65 /bbl. The regrade is at -$ 0.65 /bbl. 

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

Cash premiums for cargoes of Asia’s 380-cst high-sulphur fuel oil (HSFO) jumped to a near five-month high as demand surged in the Singapore trading window on Tuesday.

The 380-cst HSFO cash premium jumped to $2.86 a tonne to Singapore quotes on Tuesday from $1.50 a tonne in the previous session and its highest since March 19.

The firming 380-cst HSFO prices in Asia have helped push the front-month East-West arbitrage spread for the fuel to a more than four-month high of $14.25 a tonne on Tuesday, Refinitiv data in Eikon showed.

The August crack for 180 cst FO is higher at  -$5.35 /bbl with the visco spread at $1.45 /bbl.

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

We shall hedge the September Naphtha Dubai crack at $4.55 / bbl 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.

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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