Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

U.S. oil prices hit their highest since 2018 before sliding on Wednesday as the government reported a mammoth weekly build in gasoline and diesel stockpiles amid a ramp-up in output by refiners anticipating runaway demand for fuels this summer.

Brent crude  settled settled flat at $72.12 per barrel. Brent hit $72.85 earlier in the session, its highest since May 2019. It has gained 4% since the start of June.

WTI futures settled down 9 cents, or 0.1%, at $69.96 per barrel after racing earlier to $70.63, its highest since October 2018. WTI has gained 5.6% since the start of June.

Libya’s Waha Oil aims to return to normal output operations on Thursday after fixing a leak on a pipeline that caused production to fall to 130 KB/D on 9 Jun’21 from 285 KB/D a day earlier, a source at the Es Sider crude export terminal said.

Keystone XL, which was proposed in 2008 to bring oil from Canada’s Western tar sands to US refiners, was halted by owner TC Energy Corp after the US President this year revoked a key permit needed for a US stretch of the 1,200-mile project.

Negotiations between Iran and the world powers on how to revive the 2015 nuclear accord will resume this weekend, the US Deputy Secretary of State said, adding that Iran’s 18 Jun’21 presidential election was a complicating factor.

India’s fuel demand slumped in May’21 to 15.11 MMT (-11.3% MoM, -1.5% YoY), its lowest since Aug’20 with a second COVID-19 wave stalling mobility and muting economic activity in the world’s third largest oil consumer.

DOE data

The market took the draw in crude as a bullish sign. There appear to be many problems with that assumption. If one takes a look at the increase in production and imports alone, the anomaly becomes obvious. If we take into account the drop in exports as well the draw appears absolutely impossible as can be seen from the material balance statement below. 

It is also hard to explain the lower production given the increase in refining runs. But, what is the most disappointing figure for the oil bulls is the severe drop in demand for both gasoline and distillates.

At a global level, the death toll from the COVID-19 virus rose to 3.78 Million (+14,091 DoD) yesterday. The total number of active cases rose fell by around 120,000 DoD to 12.42 million. (Click here for details).

Asia’s naphtha crack snapped five straight sessions of gains as crude oil prices climbed to fresh highs but limited arbitrage volumes may provide support.

The naphtha crack fell to $104.80 a tonne on Wednesday, away from a more than two-month high of $107.15 a tonne hit in the previous session.

The July crack is higher at $0.20 / bbl

Asia’s gasoline crack jumped to a near two-week high on Wednesday amid further signs of recovering demand for motor fuels in Europe and the United States ahead of the summer driving season.

The gasoline crack jumped to $5.72 a barrel on Wednesday, up by nearly $1 from the previous session and hitting its highest since May 28.

Light distillates stocks held in Fujairah fell 5%, or 247,000 barrels, to 4.98 million barrels in the week ended June 7, their lowest since late October, data via S&P Global Platts showed.

The July crack is lower at 8.00 / bbl

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

Asian refining margins for 10 ppm gasoil slipped on Wednesday, while cash discounts for the industrial fuel widened due to sluggish demand in the physical market.

Cash differentials for gasoil with 10 ppm sulphur content were a cent lower at a discount of 5 cents per barrel to Singapore quotes on Wednesday. 

Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 8.8% to 3.5 million barrels in the week ended June 7, data via S&P Global Platts showed.

Cash differentials for jet fuel were 6 cents lower at a discount of 40 cents per barrel to Singapore quotes.

China’s domestic air traffic has returned to pre-crisis levels of growth, with demand rising 6.8% in Apr’21 compared to Apr’19, the IATA, said 9 Jun’21, coming after Mar’21 saw flat demand compared to Mar’19.

The July crack for 500 ppm Gasoil is lower at $7.20 /bbl with the 10 ppm crack at $ 8.60 /bbl. The regrade is at -$ 0.90 /bbl. 

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

Asia’s 0.5% very low-sulphur fuel oil (VLSFO) front-month crack extended declines on Wednesday to a more than one-week low on ample near-term supplies as arbitrage volumes in June are expected to hold firm, trade sources said.

Fuel oil flows into East Asia were assessed at 5 to 5.5 million tonnes in June, steady-to-higher from the 5.15 million tonnes in May and firmly higher from the 2020 monthly average of 4.82 million tonnes, assessments by Refinitiv Oil Research on Wednesday showed.

The July VLSFO crack fell to its lowest level this month at $11.81 a barrel above Dubai crude, down from $12.19 in the previous session.

Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 777,000 barrels, or about 122,000 tonnes, to 13.87 million barrels, or 2.18 million tonnes, data via S&P Global Platts showed.

The June crack for 180 cst FO is lower at  -$7.50 /bbl with the visco spread at $1.05 /bbl.

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

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.

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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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