Oil prices fell for the first time in five sessions on Wednesday after a second straight big build in weekly stockpiles of U.S. crude suggested the market wasn’t as undersupplied as bulls in the trade were trying to portray.
Brent crude finished the session down $1.48, or 1.8%, at $81.08 per barrel. Brent spiked to $83.11 on Tuesday and is up 56% on the year.
WTI crude settled down $1.50, or 1.9%, at $77.43 per barrel. WTI fell to a low of $76.86 earlier on Wednesday, after reaching a seven-year high of $79.47 the previous day. Despite the decline, the U.S. crude benchmark was still up almost 60% on the year.
The EIA also raised for a second week in a row its estimates on U.S. crude production which also weighed on sentiment in an industry that had almost written off more output from local drillers.
“We saw some profit taking as oil had run up significantly,” said Gary Cunningham, director at Tradition Energy in Stamford, Conn.
The market slipped late in the day after U.S. Energy Secretary Jennifer Granholm, speaking to the Financial Times, broached the possibility that the United States could combat higher prices by either releasing oil from strategic reserves or potentially halting crude exports.
DOE Data
While the DOE reported a build in crude stocks it is interesting to see the conditions under which the stocks have built. Referring to our Material Balance statement below will certainly throw greater light on the situation.
In the first place, production is slowly but certainly rising. In the event the US sees a long term shortfall in crude, which we don’t, raising production back to the peak of 13.1 mbpd is a definite possibility. Secondly imports have risen to a record 7.1 mbpd which is a level we have not seen since August 2019. The question arises “How is there so much oil making its way to the US?”. Third, exports have dropped to 2.1 mbpd. The US government has also raised the spectre of banning crude exports. This will also drop the demand for imports in the US.
Apart from all these is the anomaly between the reported stocks and inferred stock which just continues to grow.
Products have seen a good demand from both gasoline as well as gasoil, which has in fact shown a good growth. So this may well be supportive for the cracks.
At a global level, the death toll from the COVID-19 virus rose to 4.84 Million (+8,242 DoD) yesterday. The total number of active cases fell by 40,000 DoD to 18.00 million. (Click here for details).
Asia’s naphtha crack extended gains for a second consecutive session as inventories declined, while the prompt inter-month spread widened in backwardation for the first time this week.
The refining margin rose to $136.48 a tonne from $133.08 on the previous day. The prompt inter-month spread increased to $3.75.
Japan’s naphtha stocks fell 24,000 kilolitres to 1.35 million last week, data from PAJ showed.
The October crack is lower at $3.25 / bbl.
The November crack is at $3.75 / bbl.
Asia’s gasoline crack extended gains for a fifth straight session on Wednesday and hit an over six-week high, as inventories in the Middle East and Japan declined.
The crack rose to $9.13 a barrel, its highest since Aug. 18, from $8.41 in the last session.
The October crack is higher at $10.75 / bbl.
The October crack is at $10.25 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asian refining margins for 10 ppm gasoil climbed for a sixth consecutive session on Wednesday, soaring to their highest level since January 2020, buoyed by steady demand amid tighter regional supplies.
Asia’s cash differentials for 10ppm slipped by 4 cents to a premium of slipped to 27 cents per barrel on Wednesday
Refining margins for 10ppm gasoil surged to $15.48 per barrel over Dubai crude during Asian trading hours, up from $14.46 per barrel on Tuesday.
Asia’s cash differentials for jet fuel were at a discount of 13 cents per barrel to Singapore quotes on Wednesday, compared with a discount of 3 cents per barrel a day earlier.
Refining margins or cracks for jet fuel rose to $13.50 per barrel over Dubai crude during Asian trading hours, hitting a fresh peak since January last year. They were at $12.78 per barrel a day earlier..
Middle-distillate inventories in the Fujairah Oil Industry Zone rose 4.2% to a three-week high of 3.9 million barrels in the week ended Oct. 4, data via S&P Global Platts showed.
The October crack for 500 ppm Gasoil has dropped to $11.40 /bbl with the 10 ppm crack at $ 13.80 /bbl. The regrade is at -$ 0.10 /bbl.
The November crack for 500 ppm Gasoil is at $12.00 /bbl with the 10 ppm crack at $ 14.40 /bbl. The regrade is at +$ 0.45 /bbl. This is the first time we are seeing the regrade in the positive range.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s 0.5% very low-sulphur fuel oil (VLSFO) crack rebounded on Wednesday, recovering from a more than four-month low hit in the previous session as benchmark crude oil prices narrowly retreated from multi-year highs.
The front-month VLSFO crack rose to $11.34 a barrel above Dubai crude, up nearly $1 from the previous session when it was at its lowest since May 31, Refinitiv Eikon data showed.
Fujairah Oil Industry Zone inventories for heavy distillates and residues climbed by 1.45 million barrels, or about 229,000 tonnes, to 8.18 million barrels, or 1.29 million tonnes, data via S&P Global Platts showed.
The October crack for 180 cst FO is higher at -$0.35 /bbl with the visco spread at $1.95 /bbl.
The November crack for 180 cst FO is at -$0.55 /bbl with the visco spread at $1.80 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
No fresh trade for today. We shall hedge Jap-Nap Dubai at above $ 4.00 per barrel.
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.