Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices rose almost 5% in their strongest rebound since the outbreak of the Omicron scare, as longs returned to the market on Monday on seeing fewer negative headlines about the variant.

Brent crude futures finished the session up $3.20, or 4.6%, at $73.08 per barrel. Brent fell to $65.80 last week, from a 2014 high of $86.70 in mid-October.

WTI crude futures settled up $3.23, or 4.7%, at $69.49 per barrel. WTI hit a four-month low of $62.48 last week, after a seven-year high of $85.41 in mid October.

Also bolstering sentiment was Saudi Arabia’s move to raise the OSP, or Official Selling Price, of its U.S.- and Asia-bound crude from January and renewed hints from producer group OPEC and its allies that they may go back to cutting output.

OPEC Secretary General Mohammad Barkindo said on Saturday that oil producers might go back to slashing production if they could not stop the bleeding in crude prices that had occurred over the past six weeks. “We will continue to do what we know best to ensure we attain stability in the oil market on a sustainable basis,” Barkindo told an industry event on Saturday.

At a global level, the death toll from the COVID-19 virus rose to 5.28 Million (+5,392 DoD) yesterday. The total number of active cases fell by 400,000 DoD to 21.18 million. (Click here for details).

Reports in South Africa said Omicron cases there had only shown mild symptoms and the top U.S. infectious disease official, Anthony Fauci, told CNN “it does not look like there’s a great degree of severity” so far.

The naphtha crack in the region traded steady at $140.68 a tonne, down 30 cents from the last session..

Global naphtha cracks will narrow on declining European and Asian gasoline blending demand amid rising coronavirus cases, although naphtha’s ongoing favourability in the global cracking pool will limit more significant downside, consultancy Energy Aspects said in a report.

The January crack is higher at $ 3.75 /bbl.

Asia’s gasoline crack rose on Monday as hopes that the Omicron COVID-19 variant would cause mostly mild symptoms eased demand-related concerns.

The refining profit margin rose to $9.36 a barrel, the highest since Nov. 22, from $8.28 on Friday.

On the supply side, refiners in China are unlikely to export diesel for the rest of the year due to an ongoing shortage for the fuel in the country, which could mean they will use their export quotas to ship out gasoline, Refinitiv Oil Research said in a report. 

The January crack is lower at $10.25/ bbl.

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

Asia’s cash premiums for 10 ppm gasoil rose to their highest in nearly two weeks on Monday, supported by firmer buying interests in the physical market, while the Dec/Jan time spread for the industrial fuel grade widened its backwardation.

Cash premiums for gasoil with 10 ppm sulphur content climbed to 47 cents per barrel to Singapore quotes, compared with 44 cents per barrel on Friday.

The differentials, however, have shed about 45% since hitting a recent high of 86 cents in November, weighed down by worries of increasing supplies and the Omicron coronavirus variant’s threat to near-term demand recovery.

The prompt-month spread for 10 ppm gasoil , which have remained in a backwardated structure since the beginning of September, traded at 65 cents per barrel on Monday.

Refining profit margins for 10 ppm gasoil slipped 24 cents to $12.05 a barrel over Dubai crude during Asian trading hours as raw material crude prices rose by more than $1 per barrel on Monday

The January crack for 500 ppm Gasoil is higher at $11.10/bbl with the 10 ppm crack at $12.10 /bbl. The regrade is at -$0.95 /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) dipped on Monday, but stayed within sight of their highest levels since February 2020 amid tighter regional supplies.

Cash differentials for Asia’s 0.5% VLSFO were at a premium of $21.70 a tonne to Singapore quotes, down from $22.36 per tonne at the end of last week. The premiums, which hit a multi-month high of $22.60 last Thursday, have more than doubled in the last two weeks.

The front-month VLSFO crack was at $13.73 per barrel against Dubai crude during Asian trade, compared with $14.48 per barrel on Friday.

Meanwhile, Asia’s cash differentials for 380-cst high sulphur fuel oil (HSFO) widened their discounts to $1.23 cents per tonne to Singapore quotes on Monday, compared with a discount of $1.09 per tonne on Friday.

“Weaker demand will put further pressure on HSFO, which slipped into a shallow contango at the front of the market… HSFO is likely to continue to underperform until gas prices moderate in the spring,” consultancy Energy Aspects said in a note.

The Dec/Jan time spread for the 380-cst HSFO Ftraded at minus 50 cents per tonne on Monday.

The January crack for 180 cst FO is lower at  -$6.40 /bbl with the visco spread at $1.35 /bbl.

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

No Fresh trades 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

Leave a Comment