Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices sank their most in a week on Wednesday after the U.S. Energy Information Administration reported a crude build of 1.0 million barrels for last week, tripping up oil longs who had anticipated a large drawdown instead.

Brent crude futures finished the session down $2.14, or 2.5%, at $82.64 per barrel. Brent neared a three-year high of $86.70 earlier in the session.

WTI crude futures fell $2.81, or 3.3%, at $81.34 a barrel per barrel. WTI neared a seven-year high at 84.70 earlier on Wednesday before tumbling.

Another reason for the tumble in oil prices — inflation, as indicated by the Consumer Price Index, expanding at its fastest rate in more than 30 years with a 6.2% jump in the year to October, driven by, of all things, high energy prices. The impact of soaring fuel prices on an economy emerging from the ravages of the coronavirus pandemic has not been missed by President Joe Biden, who vowed to strike back against what he described as “price gouging” in the energy sector. “Inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me,” Biden said in a statement issued by the White House.

That sparked a rally in the dollar, which undermines the price of oil as it raises the cost for other nations because oil is largely transacted in dollars.


The DOE report appeared in line with the market expectation for a build in crude stocks, though a little less than what was expected. Further allaying market fears about a shortage of crude was the data that Cushing stocks were nearly unchanged. As usual, there are discrepancies with our material balance statement which suggests that the API data may have been more correct.

The crude stocks, according to the data above should have actually reported a drawdown rather than a modest build. For a change, the draw in distillate stocks appears to be under reported. Gasoline demand has been steady at above 9 million barrels per day so the demand story appears intact.

At a global level, the death toll from the COVID-19 virus rose to 5.08 Million (+7,627 DoD) yesterday. The total number of active cases rose by 10,000 DoD to 18.73 million. (Click here for details).

Asia’s naphtha crack extended gains on Wednesday as the market remained tight amid firm feedstock demand and dwindling supplies.

The crack surged to $172.95 a tonne from $169.13 in the last session.

However, the upside was limited after light distillates stocks at Fujairah Oil Industry Zone, which includes naphtha and gasoline, rose by 750,000 barrels to a near one-month high of 5.6 million barrels.

The December crack has sunk $ 4.80 /bbl.

Asia’s gasoline crack eased to $12.19 a barrel from $13.29 in the previous session after inventories at Fujairah rose.

India’s fuel demand rose in October to a seven-month peak, with gasoline sales surging to an all-time high, government data showed on Tuesday, as festivals boosted mobility and economic activity in the world’s third biggest oil consumer.

The December crack is lower at $10.70 / bbl

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

Cash differentials for gasoil with 10 ppm sulphur content, were at a premium of 84 cents per barrel to Singapore quotes, up from 83 cents per barrel on Tuesday.

Cash differentials for jet fuel rose 8 cents to a premium of 35 cents per barrel over Singapore quotes.

Asian jet fuel refining margins dipped on Wednesday, but stayed within close sight of multi-month highs touched in recent weeks on recovering aviation demand, while heating demand for kerosene is starting to pick up ahead of winter.

Refining margins or cracks for jet fuel slipped to $13 per barrel over Dubai crude during Asian trading hours, down 35 cents from a day earlier. The cracks, however, have gained about 95% in the last two months.

The prompt-month time spread for the aviation fuel in Singapore widened its backwardation on Wednesday to trade at a premium of 38 cents per barrel, compared with 18 cents a barrel on Tuesday.

The December crack for 500 ppm Gasoil is lower at $12.45 /bbl with the 10 ppm crack at $ 14.75 /bbl. The regrade is at -$ 0.45 /bbl. 

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

Asia’s front-month crack for 0.5% very low-sulphur fuel oil (VLSFO) eased on Wednesday from a multi-month high touched in the previous session, while cash premiums for the marine fuel rose to a nine-month high driven by stronger cargo demand.

The front-month VLSFO crack was at $14.83 per barrel against Dubai crude during Asian trade, compared with $14.90 per barrel a day earlier.

Cash differentials for Asia’s 0.5% VLSFO were at a premium of $5.31 a tonne to Singapore quotes, their highest since Feb. 9. They were at a premium of $4.44 per tonne on Tuesday, and have gained 175% in the last week.

Asia’s cash premium for 380-cst high sulphur fuel oil (HSFO) rose to 65 cents per tonne to Singapore quotes on Wednesday, up from 23 cents per tonne in the previous session.

Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues jumped 42.2%, or 3.1 million barrels (about 465,000 tonnes), from the previous week to 10.5 million barrels (1.6 million tonnes), data via S&P Global Platts showed..

The December crack for 180 cst FO is lower at  -$7.90 /bbl with the visco spread at $1.40 /bbl.

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

No Fresh trades 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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