Crude OilNaphthaGasolineDisitllatesFuel OilHedge Strategy

The rout in oil is deepening, with the one-two punch of a resurgent dollar and new Covid restrictions in No. 2 economy China wiping nearly 10% off crude prices in just over a week.

Brent Crude futures settled down $1.66, or 2.3%, at $69.04 per barrel. Brent lost 7.7% last week, its biggest weekly decline in nine months. 

WTI settled settled Monday’s trade down $1.80, or 2.6%, at $66.48 per barrel. Last week, WTI lost 7.7%, bringing the combined drop over the past six sessions to above 9%.

The plunge in oil came amid new Covid-related curbs in Asia, especially in China, that stoked worries about a setback in global fuel demand. China cancelled a horde of flights and issued warnings against travel in 46 cities, and limited public transport and taxi services in 144 of the worst Covid-hit areas.

A rally in the U.S. dollar, which hit a near three-week high against a basket of other currencies, also weighed on oil prices after Friday’s stronger-than-expected U.S. jobs report spurred bets that the Federal Reserve could move more quickly to tighten monetary policy.

At a global level, the death toll from the COVID-19 virus rose to 4.32 Million (+7,955 DoD) yesterday. The total number of active cases rose by 10,000 DoD to 16.51 million. (Click here for details).

Asia’s naphtha crack jumped to $142.15 per tonne on Friday, up from $136.90 a tonne on Thursday and lingering near a multi-year high touched last week.

The naphtha crack, which climbed 2.3% last week, has climbed nearly 35% in the last two months.

The September crack is higher at $5.35 / bbl.

Asia’s gasoline crack inched lower on Friday, but stayed within close sight of a multi-month peak hit in the previous session on tighter supplies and hopes of firmer demand as vaccination drives help governments ease mobility restrictions.

The gasoline crack slipped to $9.51 per barrel on Friday, as against Thursday’s $9.92 per barrel that was the highest level since November 2019. The crack has gained 8.3% last week, the steepest weekly rise since July 9.

China’s fuel demand is on track to hit record highs this year on a rebound in car sales and booming domestic air travel, even as a resurgence of COVID cases slows movement in some cities in the near term, analysts say. Overall consumption of gasoline, diesel and aviation fuel in the world’s top crude oil importer is expected to grow by 7% to 11% in 2021 to a record between 8.4 million and 8.9 million barrels per day, analysts at consultancy SIA Energy, IHS Markit and Energy Aspects estimated. Gasoline demand, which accounts for a quarter of China’s refined fuel use, is forecast to rise by 11% to 13% this year to a record 3.8 million to 4.1 million barrels per day, well above the IEA’s March forecast of 3.5 million bpd.

The September crack is higher at $10.65 / bbl.


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

Cash differentials for gasoil with 10 ppm sulphur content flipped to a premium of 1 cent to Singapore quotes on Friday. There were at a discount of 2 cents per barrel to Singapore quotes on Thursday.

Gasoil stocks in the ARA refining and storage hub rose 1.5% to 2.1 million tonnes in the week ended Aug. 5, data from Dutch consultancy Insights Global showed.

Cash differentials for jet fuel  were at a discount of 5 cents per barrel to Singapore quotes on Friday, compared with a 22-cent discount a day earlier.

Asian refining margins for jet fuel climbed on Friday, posting their biggest weekly gain in more than three months, while cash differentials for the aviation fuel in Singapore were at their smallest discounts in two weeks. The regional jet fuel market is partly supported by arbitrage demand from the West, market watchers said.

Asian jet fuel refining margins rose to $6.42 per barrel over Dubai crude during Asian trade, up from $6.09 per barrel a day earlier. The crack has risen nearly 17% last week, the biggest weekly gain since April 23.

Flight cancellations due to the latest COVID outbreaks will cut jet fuel demand for the next two weeks, but full-year aviation fuel demand is seen nearing or topping 2019 levels, at between 880,000 and 947,000 bpd in 2021, Energy Aspect’s Liu Yuntao and FGE’s Mia Geng estimated.

The September crack for 500 ppm Gasoil is lower at $6.80 /bbl with the 10 ppm crack at $ 8.30 /bbl. The regrade is at -$ 0.80 /bbl. 



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

Cash premiums for cargoes of Asia’s high-sulphur fuel oil (HSFO) extended gains on Friday, ending the week at multi-month highs amid limited supply and firm demand from utilities and refiners.

Cash premiums for 180-cst HSFO hit a more than nine-month high of $5.30 a tonne to Singapore quotes, while premiums for cargoes of 380-cst HSFO climbed to a nine-month high of $3.50 a tonne.

The VLSFO market also nudged up on Friday as lower arbitrage arrivals into Asia this month are expected to weigh on supplies.

Fuel oil stocks in the ARA refining and storage rose by 171,000 tonnes to 1.24 million tonnes in the week ended Aug. 5, data from Dutch consultancy Insights Global (IG) showed. Compared with last year, the inventories at the ARA hub were 1% lower, but were above the five-year seasonal average of 1.18 million tonnes.

The September crack for 180 cst FO is higher at  -$4.60 /bbl with the visco spread at $1.30 /bbl.

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

The Naphtha Dubai crack strip has really jumped over the weekend. We shall hedge from September to Q122 at current levels of $5.35 /bbl, $4.85/bbl and $3.85 / bbl respectively. 

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