Crude OilNaphthaGasolineDisitllatesFuel OilHedge Strategy

U.S. crude prices plunged below the key $70 per barrel support on Wednesday, after a shock stockpile build added to COVID concerns that had been weighing on the market the past two days.

Brent Crude futures settled down $2.03, or 2.8%, at $70.38 per barrel. Brent has lost 4% in the two previous sessions. 

WTI settled settled down $2.41, or 3.4%, at $68.15 per barrel. WTI has lost 4.5% in two previous sessions.

With U.S. gasoline futures near their highest since October 2014, the gasoline crack spread – a measure of refining profit margins – closed at to its highest since hitting a record in April 2020 when WTI settled in negative territory.

The weekly build in crude suggested that demand for energy might be slowing as COVID caseloads across the world were ramping again from the Delta variant of the virus.

Saudi Arabia raised the September official selling prices (OSPs) for the flagship Arab light crude to $3 a barrel above the Oman/Dubai average for Asia, the country’s state oil producer Aramco said on Wednesday.

DOE data

The DOE data surprised everybody with both the builds and the draws. While both builds were totally unexpected, the draw in gasoline stocks helped stem the shock somewhat with its size.

The crude build is more or less certainly attributable to the drop in imports to the tune of 585 KB per day. Likewise, the draw in gasoline is possibly attributable to a massive rise of 450 kb per day in gasoline demand. However, the material balance statement suggests that this is largely offset by a production increase of 372 kb per day.

The material balance statement also suggests a far greater build in distillate stocks due to a drop of 738 kb per day in demand. However, these variances seem to keep on occurring.

At a global level, the death toll from the COVID-19 virus rose to 4.27 Million (+10,117 DoD) yesterday. The total number of active cases rose by 240,000 DoD to 15.71 million. (Click here for details).

Coronavirus cases worldwide surpassed 200 million on Wednesday, according to a Reuters tally, as the more-infectious Delta variant threatens areas with low vaccination rates and strains healthcare systems.

The World Health Organization is calling for a halt on COVID-19 vaccine boosters until at least the end of September as the gap between vaccinations in wealthy and poor countries widens.

Asia’s naphtha crack dipped on Wednesday while the intermonth spread between second-half September and second-half October narrowed in backwardation.

The naphtha crack slipped further to $135.18 a tonne on Wednesday, a dollar lower than the previous trading day.

The August crack is lower at $3.95 / bbl.
The September crack is at $4.45 / bbl.

Asia’s gasoline crack to ICE Brent rose to $9.01 a barrel to touch its highest in nearly a month on Wednesday on tight supplies, while a flurry of trades on window lifted prices for the benchmark 92-octane grade.

Gasoline stocks at Fujairah Oil Industry Zone have also fallen 1.606 million barrels to 5.473 million barrels for the week ended Aug. 2, the lowest level in six weeks, according to industry information service S&P Global Platts.

The August crack is higher at $11.10 / bbl.
The September crack is at $10.80 / bbl.


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

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

Cash differentials for jet fuel  were a cent lower at a discount of 21 cents per barrel to Singapore quotes on Wednesday.

Asian jet fuel refining margins dropped on Wednesday, moving away from a multi-month high touched in the previous session, as traders were concerned near-term aviation demand would take a hit from a resurgence in China’s COVID-19 infections.

Refining profit margins, or cracks, for jet fuel in Singapore dropped to $6.46 per barrel over Dubai crude during Asian trading hours, down from Tuesday’s $6.75 per barrel, the strongest since March last year.

Middle-distillate inventories in the Fujairah Oil Industry Zone rose 17.9% to 3.1 million barrels in the week ended Aug. 2, data via S&P Global Platts showed.

The August crack for 500 ppm Gasoil is lower at $5.85 /bbl with the 10 ppm crack at $ 7.35 /bbl. The regrade is at -$ 0.85 /bbl.
The September crack for 500 ppm Gasoil is at $7.15 /bbl with the 10 ppm crack at $ 8.65 /bbl. The regrade is at -$ 0.80 /bbl. 



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

Asia’s high-sulphur fuel oil (HSFO) market firmed on Wednesday, supported by expectations of increased consumption from utilities in August and September, trade sources said.

Cash premiums 180-cst HSFO hit a more than nine-month high of $3.97 a tonne to Singapore quotes while premiums for cargoes of 380-cst HSFO jumped to a near five-month high of $3.08 a tonne.

Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 891.000 barrels, or about 140,000 tonnes, to 10.32 million barrels, or 1.62 million tonnes, data via S&P Global Platts showed. The stock levels were 27% lower than year ago levels.

The August crack for 180 cst FO is higher at  -$5.30 /bbl with the visco spread at $1.45 /bbl.
The September crack for 180 cst FO is at  -$4.85 /bbl with the visco spread at $1.45 /bbl.

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

No activity 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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