Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Crude prices rose after the largest draw in crude stocks reported in more than 3 years.

Brent crude futures settled up 77 cents, or 0.9%, at $91.55 per barrel. Brent lost 2% between Friday’s settlement and Tuesday’s.

WTI crude futures settled up 30 cents, or 0.3%, at  $89.66 per barrel. WTI lost some 2.7% in two previous sessions.

Crude prices jumped more than $1 a barrel within a minute of the data, then retreated almost as spectacularly before settling less than one percent higher.

While the mood among those long crude wasn’t necessarily gloomy, it wasn’t exuberant either — certainly not in the vein of last week where no sentiment was spared to push prices to beyond $90 a barrel. This is not unnatural given the backdrop of the prospect of the US sanctions being removed from Iran oil exports.

doe data

The draw in crude is the largest since October 2018. It appears to have been caused by the double whammy of a large decrease in crude imports along with a larger increase in crude exports. In fact, our material balance statement suggests that the draw may be actually higher than reported.

While the gasoline demand has appeared to have recovered smartly to over 9.1 Million barrels after a long time, material balance statement still suggests a build. Similarly, the material balance in distillate stocks also suggests a small build.

At a global level, the death toll from the COVID-19 virus rose to 5.80 Million (+12,919 DoD) yesterday. The number of daily deaths crossed 10,000 after a very long period. The total number of active cases rose marginally by 7,000  DoD to 74.51 million. We sincerely hope this represents a plateau before a reversal in the number of active cases. (Click here for details).

Asia’s naphtha crack gained on Wednesday amid tight supplies from the Middle East even as inventories at the region’s top exporter rise, while a decline in crude oil prices further supported margins. The refining profit margin rose to $158.85 a tonne, up $3.45 from last close. 

Stocks of light distillates at Fujairah Oil Industry Zone, including gasoline and naphtha, jumped for a second straight week, rising by 137,000 barrels to 6.499 million barrels.

Meanwhile, PetroChina has started a 33.9 billion yuan ($5.33 billion) programme to expand the petrochemical capacity at a subsidiary plant in northeast China and cut refined fuel production, according to a company post and state media report.

The March crack is higher at $2.65 per barrel. 

Stocks of light distillates at Fujairah Oil Industry Zone, including gasoline and naphtha, jumped for a second straight week, rising by 137,000 barrels to 6.499 million barrels.

The March crack is higher at 16.60/bbl.

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

Asia’s cash premiums for jet fuel dipped on Wednesday, but stayed close to a multi-month peak scaled earlier this week amid expectations for a gradual recovery in global aviation demand.

Cash premiums for jet fuel were at $1.25 per barrel to Singapore quotes on Wednesday. Differentials on Monday hit $1.94 a barrel, a level not seen since early March 2018.

Refining profit margins, also known as cracks, for jet fuel slipped to $13.87 per barrel over Dubai crude during Asian trading hours, compared with $14.91 per barrel a day earlier.

Scheduled airline capacity in Northeast Asia rose 25.2% in the week to Monday compared with the previous week, while scheduled seats in Central Asia and South Asia increased 5.3% and 2.6% respectively this week, according to aviation data firm OAG.

Middle-distillate inventories in the Fujairah Oil Industry Zone climbed 36% to 2.5 million barrels in the week ended Feb. 7, data via S&P Global Platts showed. The weekly stocks in Fujairah have averaged 1.9 million barrels so far this year, compared with a weekly average of 3.5 million barrels in 2021, Reuters calculations showed.

The February crack for 500 ppm Gasoil is higher at $16.55 /bbl with the 10 ppm crack at $17.55 /bbl. The regrade is at -$2.20 /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) edged higher on Wednesday, while the front-month crack for the marine fuel grade rose as crude prices slipped.Cash premiums for Asia’s 0.5% VLSFO rose 13 cents to $13.91 a tonne to Singapore quotes.

The front-month VLSFO crack climbed to $18.12 per barrel against Dubai crude during Asian trading hours, compared with $17.84 a barrel on Tuesday.

The 380-cst HSFO barge crack for January traded at a discount of $12.98 a barrel to Brent on Wednesday, while cash differentials for 380-cst high sulphur fuel oil (HSFO) were at a premium of 46 cents per tonne to Singapore quotes.

Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues fell 4.2%, or 474,000 barrels (about 71,000 tonnes), from the previous week to 10.9 million barrels (1.6 million tonnes), data via S&P Global Platts showed. Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were about 11% higher.

The February crack for 180 cst FO is lower at  -$8.20 /bbl with the visco spread at $1.75 /bbl.

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

We will hedge March Gasoline Dubai cracks at current levels of $16.60.

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

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