Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices were up for a third day in a row on Wednesday as promising monthly U.S. jobs data due later in the week offset unexpectedly large builds in fuel stockpiles that would have typically driven the market lower.

Brent crude futures ended up 80 cents, or 1%, to $80.80 a barrel. WTI crude futures closed up 86 cents, or 1.1%, to $77.85 per barrel.

The U.S. Labor Department is due to report December payroll numbers for both the public and private sectors on Friday, with expectations for a growth of 424,000 jobs versus November’s gain of 210,000. Ahead of those numbers, payrolls surveyor ADP reported on Wednesday that private sector jobs itself grew almost twice as much to expectations last month, hitting 807,000.

“There is a strong correlation between monthly U.S. jobs numbers and oil consumption and I think that’s what’s keeping the oil market higher today, in spite of the huge unexpected product inventories for last week,” said John Kilduff, founding partner at Again Capital, an energy hedge fund in New York.

DOE data

The DOE data corroborated the data reported by the API. John Kilduff said the first week of January seasonally showed larger-than-expected drawdowns in crude stocks and higher-than-forecast builds in product inventories as those with crude barrels in their hold cleared them to avoid tax liabilities for the previous year.

Having said that the huge build in product stocks must provide a dent in the aspirations of the bulls. Gasoline demand dropped around 20% to 8.17 mb per day.

Our material balance shows the usual set of anomalies. With gasoline production offsetting the drop in gasoline demand, the jump in gasoline inventories is absolutely beyond our comprehension. 

At a global level, the death toll from the COVID-19 virus rose to 5.48 Million (+7,218 DoD) yesterday. The total number of active cases rose by 2.0 million DoD to 35.89 million. (Click here for details).

Asia’s naphtha crack slumped on Wednesday, dropping for a third straight day after data showed Middle-Eastern inventories jumped last week.

The crack plunged to $138.33 a tonne, lowest since Oct. 7, from $152.63. Naphtha margins have shed nearly 16% this week. The the inter-month spread between first-half February and March narrowed in backwardation to $7.50

The January crack has crashed further to $ 2.60 /bbl.

The February crack is at $2.65 per barrel. 

Asia’s gasoline crack eased by 49 cents to $11.71 per barrel.

In a bearish signal to markets, stocks of light distillates at Fujairah Oil Industry Zone, including gasoline and naphtha, climbed 9%, or 410,000 barrels, to 4.751 million barrels in the week ended Jan. 3, according to industry information service S&P Global Platts.

The January crack is lower at $12.50 /bbl.

The February crack is at 11.70 /bbl.

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

Asia’s cash premiums for 10 ppm gasoil rose for a third consecutive session on Wednesday, soaring to their highest level since June 2020, buoyed by expectations for tighter supplies in the near term.

Cash differentials for gasoil with 10 ppm sulphur content were at a premium of 97 cents per barrel to Singapore quotes, compared with 94 cents per barrel a day earlier.

Lower exports from China would keep the regional gasoil market tight as demand is expected to recover further in coming months, trade sources said.

China has more than halved the volume of export quotas for refined fuel under the first allotment for 2022, in line with the government’s recent policy to curb excessive domestic refinery production amid a broad plan to reduce carbon emissions. 

Refining margins, also known as cracks, for 10 ppm gasoil rose to a three-week high of $13.73 a barrel over Dubai crude during Asian trading hours on Wednesday, compared with $13.41 a barrel on Tuesday.

Jet fuel refining profits climbed 29 cents to $11.04 per barrel over Dubai crude on Wednesday, their strongest in a week.

The January crack for 500 ppm Gasoil has jumped to $13.35 /bbl with the 10 ppm crack at $14.35 /bbl. The regrade is at -$2.20 /bbl.

The February crack for 500 ppm Gasoil is at $13.25 /bbl with the 10 ppm crack at $14.25 /bbl. The regrade is at -$1.55 /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) rose on Wednesday amid active buying interest in the physical market, while the front-month crack for the marine fuel grade slumped to a two-month low.

Cash premiums for Asia’s 0.5% VLSFO rose to $11.88 a tonne to Singapore quotes, compared with $10.43 per tonne a day earlier.

The front-month VLSFO crack dropped to $12.80 per barrel against Dubai crude during Asian trading hours, a level not seen since Nov. 5. The crack was at $13.27 a barrel on Tuesday.

Increasing supplies from China would likely weigh on the regional fuel oil market in coming months, market watchers said.

China has issued 6.5 million tonnes of quotas for exporting low-sulphur fuel oil, used primarily as marine bunker fuel, under the first allotment for 2022. The allowance is 30% higher from the 5 million tonnes released in the first batch of 2021. 

Meanwhile, the 380-cst HSFO barge crack for January traded at a discount of $12 a barrel to Brent on Wednesday, while cash differentials for 380-cst high sulphur fuel oil (HSFO) were at a discount of 55 cents per tonne to Singapore quotes.


Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues rose 6.4%, or 606,000 barrels (about 90,000 tonnes), from the previous week to 10.1 million barrels (1.5 million tonnes), data via S&P Global Platts showed. FUJAIRAH/

– Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were about 13% lower.

The January crack for 180 cst FO is lower at  -$7.55 /bbl with the visco spread at $1.45 /bbl.

The February crack for 180 cst FO is at  -$7.10 /bbl with the visco spread at $1.30 /bbl.

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

We shall hedge the February and March 10ppm Dubai cracks at $14.25 /bbl and $14.15 /bbl. We shall also hedge the whole strip out to Cal 23 at current levels.   

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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