Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

The New Year rally in oil showed no signs of slowing on Wednesday as those long the market added another 2% to crude prices after the previous day’s 4% climb.

Brent crude futures settled up 95 cents, or 1.1%, at $84.67 per barrel. Brent is up more than 3% on the week, with a net gain of around 14% over the past four weeks.

WTI crude futures settled  Wednesday’s trade up $1.42, or 1.8%, at $82.92 per barrel. Following Tuesday’s near 4% gain, WTI is up almost 5% week-to-date and has risen nearly 16% over the past four weeks.

Traders seem to have ignored inventory data, which have shown massive product stock builds, as also inflation data, which shows inflation growing at the fastest pace since 1982.

DOE data

Crude stocks appear to have fallen significantly. Having said that, the build in product stocks is surprisingly large. What is worrisome is the drop in gasoline demand to below 8 mb/day.  The Material Balance statement seems to be totally at odds with the reported stock balances adding further confusion to the data.

 

In the face of such conflicting data, it is not surprising to see traders adhering to the old phrase, “Be long or be wrong”.

At a global level, the death toll from the COVID-19 virus rose to 5.53 Million (+8,023 DoD) yesterday. The total number of active cases rose by 2.2 million DoD to 49.0 million. (Click here for details).

Asia’s naphtha crack inched higher to $137.93 per tonne from $137.68 on Tuesday, although the upside was capped due to dwindling demand from petrochemical units.

The February crack is lower at $2.60 per barrel. 

Asia’s gasoline crack eased slightly on Wednesday after Middle Eastern and U.S. inventories increased, denting demand sentiment. The gasoline crack fell to $10.47 a barrel, down 25 cents from the last close. The downside remained limited as market players weighed the impact of Omicron variant of COVID-19 on fuel demand amid high vaccination rates in the region.

In a bullish signal to markets, gasoline consumption in India, a key motor-fuel market, rose 6.4% from November to 2.82 million tonnes, a record-high as per data going back to 1998, and was 13.9% higher than December 2019, government data showed.

Stocks of light distillates at Fujairah Oil Industry Zone, including gasoline and naphtha, rose 134,000 barrels, or 2.8%, on the week to 4.885 million barrels.

The February crack is higher at 12.35/bbl.

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

Asian refining margins for 10 ppm gasoil jumped to their strongest level in nearly three months on Wednesday, buoyed by expectations for firmer industrial demand, while regional supplies remain tight.

Cash premiums for gasoil with 10 ppm sulphur content rose by a cent on Wednesday to 79 cents per barrel to Singapore quotes.

Refining margins, also known as cracks, for 10 ppm gasoil climbed to $15.37 a barrel over Dubai crude during Asian trading hours, a level not seen since Oct. 18. They were at $14.40 per barrel a day earlier.

The prompt-month time spread for the benchmark gasoil grade in Singapore remained in backwardation to trade at 90 cents per barrel on Wednesday, compared with 91 cents per barrel on Tuesday.

Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 24.4% to 1.2 million barrels in the week ended Jan. 10, data via S&P Global Platts showed.

The February crack for 500 ppm Gasoil is higher at $14.40 /bbl with the 10 ppm crack at $15.40 /bbl. The regrade is at -$1.30 /bbl.

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

Asia’s 0.5% very low-sulphur fuel oil (VLSFO) crack firmed on Wednesday on persistently limited supplies of the fuel, despite rising crude oil prices.

The front-month VLSFO crack climbed to $16.73 a barrel above Dubai crude, up from $16.56 in the previous session and near a one-year high of $17.84 a barrel hit on Dec. 30, Refinitiv Eikon data showed.

Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 945,000 barrels, or about 149,000 tonnes, to 9.18 million barrels, or 1.45 million tonnes, data via S&P Global Platts showed. Fujairah’s fuel oil inventories were 12% higher than year-ago levels.

The February crack for 180 cst FO is lower at  -$7.55 /bbl with the visco spread at $1.35 /bbl.

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

No fresh action for 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.

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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