Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices climbed Wednesday as turmoil in Kazakhstan threatened to disrupt supplies from one of the largest producers in the world, and a member of the OPEC+ cartel.

Brent crude futures settled up $1.19, or 1.5%, at $81.99 per barrel. Brent is also up almost 6% on the year. Brent’s six-month backwardation stood at about $4 a barrel, its widest since late November.

WTI crude futures settled up $1.61, or 2.1%, at $79.46 per barrel. WT has also risen about 6% since 2022 began.

Russia has sent troops into neighboring Kazakhstan to try and quell violent protests, seemingly triggered by the latest sharp rise in fuel prices. Although there are no indications that oil production has been affected so far, the former Soviet state is currently producing 1.6 million barrels of oil per day. There were no indications that oil production in Kazakhstan has been affected so far. The country produces about 1.6 million barrels of oil per day.

The one immediate caveat to this bullish outlook for crude prices is the continued spread of the Omicron Covid-19 variant, with the U.S. recording a global record of more than 1 million new daily cases earlier this week. If this continues it could lead to more aggressive measures to reduce mobility, or at least less demand for travel.

Saudi Arabia, cut the official selling price for all grades of crude it sells to Asia in February by at least $1 a barrel, three sources with knowledge of the matter said.

At a global level, the death toll from the COVID-19 virus rose to 5.49 Million (+6,834 DoD) yesterday. The total number of active cases rose by 1.8 million DoD to 37.7 million. (Click here for details).

Asia’s naphtha crack fell on Thursday, declining for a fourth consecutive session after Singapore inventories climbed to a near four-month high in the week to Jan. 5.

The crack slumped to $129.35 a tonne, lowest since Sept. 14, from $138.33 on Wednesday. Naphtha margins have declined over 21% this week.

The January crack is lower at $ 2.30 /bbl.

The February crack is at $2.40 per barrel. 

Asia’s gasoline crack slipped to $11.23 a barrel, down 48 cents from the last close.

Singapore’s onshore inventory of light distillates jumped 1.56 million barrels to 13.06 million barrels, according to data released on Thursday by Enterprise Singapore.

The January crack is lower at $11.90 /bbl.

The February crack is at 11.35 /bbl.

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

Asian jet fuel refining margins rose for a fourth straight session on Thursday, but traders were concerned any further upside would be limited as several countries reimposed travel restrictions and flight bans to curb surging COVID-19 infections.

Refining margins or cracks for jet fuel jumped to $11.56 per barrel over Dubai crude during Asian trading hours, the strongest since Dec. 16. They were at $11.04 per barrel a day earlier.

Hong Kong said it would ban flights from eight countries for two weeks from Jan. 8, affecting Britain, the United States, Canada, Australia, Pakistan, Philippines, France and India. The northwestern Chinese city of Xian has suspended all international passenger flights from Jan. 5 at its airport until further notice. 

Cash differentials for jet fuel flipped to a narrow premium of 5 cents per barrel to Singapore quotes on Thursday, compared with a discount of 12 cents per barrel on Wednesday.

The Jan/Feb time spread for the aviation fuel in Singapore narrowed its backwardation by 2 cents on Thursday to trade at 17 cents per barrel.

Singapore’s middle distillate inventories rose 3.2% to a six-week high of 8.1 million barrels in the week to Jan. 5, according to Enterprise Singapore data. Weekly Singapore middle distillate inventories averaged 11.8 million barrels in 2021, compared with an average of 13.9 million barrels in 2020, Reuters calculations showed. This week’s stocks were 43.9% lower than a year earlier.

The January crack for 500 ppm Gasoil is lower at $13.00 /bbl with the 10 ppm crack at $14.00 /bbl. The regrade is at -$2.10 /bbl.

The February crack for 500 ppm Gasoil is at $13.10 /bbl with the 10 ppm crack at $14.10 /bbl. The regrade is at -$1.45 /bbl.

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

Asia’s 0.5% very low-sulphur fuel oil (VLSFO) market complex rose on Thursday, with physical cargo premiums and derivatives in the paper market posting narrow gains after hitting multi-week lows in the previous session.

Front-month backwardation in the VLSFO market climbed to $10.75 a tonne on Thursday, up from a near two-month low of $9.25 a tonne in the previous session, Refinitiv-Eikon data showed. Similarly, the front-month VLSFO crack rose to $12.95 a barrel above Dubai crude, up by 15 cents from Wednesday’s two-month low, the data showed. VLSFO cash premiums climbed to $13.15 a tonne to Singapore quotes, up from a near six-week low of $10.43 a tonne earlier in the week. 

Onshore fuel oil stocks rose by 1.49 million barrels, or about 235,000 tonnes, to a six-week high of 21.06 million barrels, or 3.32 million tonnes, in the week ended Jan. 5, Enterprise Singapore data showed. The rise in residual fuel inventories offset a 1.37 million barrel drop in the week to Dec. 29 which sent fuel oil stocks to a three-month low of 19.56 million barrels. However, residual fuel stocks were 6% lower, compared to the same period last year and well below the 2021 weekly average of 22.48 million barrels.

The January crack for 180 cst FO is lower at  -$7.65 /bbl with the visco spread at $1.55 /bbl.

The February crack for 180 cst FO is at  -$6.95 /bbl with the visco spread at $1.30 /bbl.

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

No fresh action 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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