Crude Oil
Crude futures settled higher Feb. 5 amid tightened supply outlooks, demand optimism and a weaker US dollar.
NYMEX March WTI settled up 62 cents at $56.85/bbl and ICE April Brent was up 50 cents at $59.35/bbl.
For the week, Brent gained about 6% while WTI gained 9%.
Crude prices saw additional support from a weaker US dollar. The ICE US Dollar Index was holding just above 91 in afternoon trading, down from a two-month high close of 91.52 on Feb. 4.
Crude forward structure has significantly strengthened amid the rally at the front end of the price curve. Year-ahead WTI has fallen to a more than $4/b discount to front month, opening the widest backwardation since early January 2020. However, US drilling activity, despite steadily climbing in recent weeks, remains well behind year-ago levels.
“The market is increasingly pricing in a belief that last year’s price crash together with an increased investor focus on environmental, social and corporate governance (ESG) could led to a future shortfall due to lack of investments towards exploration,” Saxo Bank head of commodity strategy Ole Hansen said in a morning note. “However, before we reach that stage, global demand needs to recover from the current 94 million barrels/day and back towards 100 million seen a year ago, while OPEC+ slowly returns 7 million barrels/day of still capped production.” Like them and others like them, we also believe the market has come too far too fast.
US energy firms added 4 oil rigs in the week to 5 Feb’21 to total 299 (-377 YoY), as crude prices hit pre-pandemic highs.
Money managers raised their net long US crude futures and options positions by 6,656 contracts to total 354,149 in the week to 2 Feb’21, the US CFTC said on Friday.
covid 19
At a global level, the death toll from the COVID-19 virus rose to 2,326,773 (+7,778 DoD) yesterday. The total number of active cases fell by around 50,000 DoD to 25.83 million. (Click here for details
Naphtha
Asia’s naphtha crack dropped to $ 107.43 per tonne on Friday, down 95 cents from Thursday’s close.
Spot premiums for light naphtha cargoes arriving in the second half of March stayed firm on expectations of tighter arbitrage supplies.
The February crack is lower at $1.85 /bbl.
The March crack is at $1.40/bbl
Gasoline
Asia’s gasoline crack edged higher for a third consecutive session to $ 4.83/bbl on Friday, up 4 cents from Thursday’s close.
Gasoline remained supported on lower supplies as refiners capped output while lockdowns in some southeast Asian countries curbed consumption of the motor fuel.
The February crack is lower at $5.25 /bbl.
The March crack is at $5.75 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for gasoil with 10 ppm sulphur content were at a discount of 14 cents a barrel to Singapore quotes, compared with a 13-cent discount on Friday.
Cash differentials for jet fuel were at a discount of 15 cents per barrel to Singapore quotes on Friday, compared with a 21-cent discount a day earlier.
Refining margins for middle distillates have increased 25% this week, the steepest rise since December 4.
Global air passenger demand in 2020 was 65.9% lower than 2019 levels, while global air cargo demand last year was about 11% below 2019, IATA data showed on Wednesday.
“Our forecast is for traffic to return to half of 2019 levels in 2021,” Alexandre de Juniac, director general and chief executive of the International Air Transport Association (IATA) said in a statement this week. “But the proliferation of restrictions on travel that we have seen since the beginning of the year could make even that modest outlook very challenging,” he added.
Gasoil stocks held independently in the ARA refining and storage hub rose 3.4% to 2.7 million tonnes in the week to Feb. 2, data from Dutch consultancy Insights Global showed. The data showed ARA jet fuel inventories climbed 3.8% to 937,000 tonnes.
The February crack for 500 ppm Gasoil is higher at $5.65 /bbl with the 10 ppm crack at $ 6.50 / bbl. The regrade is at -$ 1.60 /bbl.
The March crack for 500 ppm Gasoil at $5.85 /bbl with the 10 ppm crack at $ 6.70 / bbl. The regrade is at -$ 1.50 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
No fresh news in this market.
The January crack for 180 cst FO is lower at -$2.95 /bbl with the visco spread at $0.65 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action 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.