Crude OilNaphthaGasolineDisitllatesFuel OilHedge Strategy

Crude prices tumbled for a second day in a row after the Paris-based International Energy Agency, or IEA, said it will release 120 million barrels from the reserves of its members into the open market to bridge a global supply shortage.

Brent crude futures settled down $5.57, or 5.3%, at $101.07 per barrel.  Its low for the session was $100.68.

WTI crude futures settled down $5.73, or 5.6%, at $96.23, after an intraday low of $95.86.

Tuesday’s reversal in crude came after Brainard, who is awaiting confirmation as Fed Vice Chair, vowed to bring inflation, which grew 6.4% in the 12 months to February, according to the central bank’s closely-watched Personal Consumption Expenditure Index, to the ”neutral” target of 2% later this year.

The IEA announcement came after the Biden administration said last week it will release 180 million barrels of its own from the U.S. Strategic Petroleum Reserve over the next six months, averaging one million barrels per day.

Will big reserve releases bring crude prices down in a severely undersupplied market? No, say oil longs, and they’re right if the market remains in deficit over the longer term. But in the short term, the actions of the Biden administration and other governments have started hurting this year’s energy rally.

DOE data

The DOE data was mixed, reporting a build in crude and distillates, but a draw in gasoline stocks. The build is hard to understand with all parameters marginally changed except for exports which increased by 700 kbpd. Gasoline stocks too were impacted by a surge in exports, coupled with a drop in imports.

Our material balance statement shows draws across the board. The discrepancy in crude can perhaps be explained by a 4 million barrel drop in SPR stocks (which should accrue to commercial stocks eventually). The gasoline draw appears understated.

However, product demand continues to remain muted.


At a global level, the death toll from the COVID-19 virus rose to 6.19 Million (+3,926 DoD) yesterday. The total number of active cases fell by 200,000 DoD to 58.20 million. (Click here for details).

Asia’s naphtha refining profit margin tumbled to its lowest since June 2021 on Tuesday on concerns of slowing demand from petrochemical units. A rally in crude oil prices also brought the margin lower.

The crack slipped to $106.83 a tonne, down $7.57 from the last close. The inter-month spread widened by $1.50 in backwardation structure to $6.50 a tonne.

Most ethylene crackers in the region continue to operate at reduced rates of around 80%-90% in April amid fresh COVID-19 restrictions in China, Krystal Chung, analyst at Refinitiv Oil Research wrote in a note. “That has hampered downstream derivative demand and logistics.”

The May crack is higher at $ 1.65 per barrel 

Asia’s gasoline crack slipped below $15 a barrel on Wednesday due to volatility in crude oil benchmarks, although a series of trades on the Singapore window limited losses. The crack was down 17 cents from the last close at $14.89 a barrel.

In physical markets, Trafigura snapped up three cargoes of the benchmark 92-octane grade of gasoline. Vitol bought two cargoes of the higher 95-octane grade and a cargo of the benchmark grade of the motor fuel.

Also signaling strong consumption, stocks of light distillates at Fujairah Oil Industry Zone tumbled by 2.509 million barrels in the week ended April 4 to 3.410 million barrels, data from S&P Global Commodity Insights showed.

The May crack is higher at $18.65 per barrel.

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

Asia’s cash premiums for 10 ppm gasoil inched lower on Wednesday, but remained within close sight of a record high touched in the previous session as recovering demand across the globe grappled with limited supplies.

Cash premiums for gasoil with 10 ppm sulphur content dipped 22 cents to $7.86 a barrel to Singapore quotes, compared with Tuesday’s $8.08 a barrel that was an all-time high according to Reuters data that goes back to late 2011.

The gasoil cash premiums have surged over 31% in the last two weeks, riding on steady cargo demand in the physical market, while the prompt-month time spread for the benchmark 10 ppm gasoil grade in Singapore traded at $8.59 a barrel on Wednesday.

Refining margins, also known as cracks, for 10 ppm gasoil rose to $31.08 a barrel over Dubai crude during Asian trading hours, up from $29.39 per barrel a day earlier.

The number of journeys taken over China’s three-day Tomb-Sweeping Festival holiday tumbled by nearly two-thirds from last year, state media said, citing data from the transport ministry, as authorities battle outbreaks of COVID-19 across the country. Air travel was worst hit, with total passenger numbers falling to an estimated 562,000, down 87% from a year ago and 54% down on 2020. Road journeys fell 53% on the year, and were also slightly lower than 2020.

Middle-distillate inventories in the Fujairah Oil Industry Zone rose 4.6% to 1.9 million barrels in the week ended April 4, data via S&P Global Commodity Insights showed. Weekly stocks in Fujairah have averaged 1.9 million barrels so far this year, compared with 3.5 million barrels in 2021, Reuters calculations showed.

The May crack for 500 ppm Gasoil is lower at $30.45 /bbl with the 10 ppm crack at $31.45 /bbl. The regrade is at -$3.60 /bbl.

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

Asia’s cash premiums for 380-cst high-sulphur fuel oil (HSFO) dipped on Wednesday, but stayed within close sight of a more than two-year high touched earlier this month amid tighter supplies. The cash differentials for 380-cst HSFO slipped 47 cents to a premium of $20.98 per tonne to Singapore quotes. The premiums had hit $21.50 a tonne on April 1, the highest since in November 2019.

Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues rose 4.9%, or by 504,000 barrels, from the previous week to 10.7 million barrels (1.6 million tonnes) in the week ended April 4, data via S&P Global Platts showed. Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were about 5% lower.


The May crack for 180 cst FO is higher at $4.10 /bbl with the visco spread at $4.85 /bbl.

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

We shall hedge a tranche each of Gasoil 10ppm – Dubai and 180 cst Dubai for May at current levels of $30.45 / bbl and $4.10 / bbl respectively. We shall also hedge Cal 23 Gasoil 10ppm Dubai at current levels of $15.50 /bbl

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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