Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices edged lower Thursday after disappointing U.S. unemployment data, but remained near two-month highs, helped by expectations that global supply will remain tight as the economic recovery continues.

Brent crude futures settled down 20 cents, or 0.2%, at $84.47 per barrel. WTI crude futures settled down 52 cents, or 0.6%, at $82.12 per barrel.

The number of Americans filing new claims for unemployment benefits unexpectedly rose in the first week of January, with initial claims for state unemployment benefits increasing 23,000 to a seasonally adjusted 230,000 for the week ended Jan. 8. This figure suggests that the rise in Covid-19 cases is having an impact on the U.S. economic recovery, but the claims remain below their pre-pandemic level.

The Federal Reserve may need to raise rates four times in 2022 if inflation doesn’t improve quickly enough, Chicago Federal Reserve president Charles Evans said on Thursday, adding that because inflation has stayed high longer, the Fed has to take action quicker than expected.

“The U.S producer price inflation data came in easily as hot as the last month and could put pressure on the Fed to rein in the economy, potentially being a drag on crude prices and supporting the dollar,” said John Kilduff, a partner at Again Capital Management in New York, calling these “modestly worrisome factors.”

At a global level, the death toll from the COVID-19 virus rose to 5.53 Million (+7,299 DoD) yesterday. The total number of active cases rose by 2.1 million DoD to 51.1 million. (Click here for details).

Asia’s naphtha crack rose for a second straight day to $140.08 a tonne from $137.93 in the last session.

“A heavy refinery turnaround season east of Suez in the first part of the year will combine with limited Chinese exports and modest Black Sea and Mediterranean loadings to limit inflows to the region ahead of an expected robust driving demand surge from key gasoline importers, such as Indonesia and Australia,” consultancy Energy Aspects wrote in a note. “Both Japanese and South Korean cracker operators have been active in the spot markets, securing several high-paraffinic (naphtha) cargoes for February,” Energy Aspects further added.

The February crack is higher at $2.75 per barrel. 

Asia’s gasoline crack rose on Thursday despite an increase in Singapore inventories for a second consecutive week, over expectations of tight supplies. The crack rose to $11.16 a barrel, up 69 cents from last close. The upside remained limited due to surging Omicron cases across the world.

Singapore’s onshore inventory of light distillates rose 590,000 barrels to a three-and-a-half month high of 13.652 million barrels in the week to Jan. 12, according to data released by Enterprise Singapore.

The February crack is higher at 12.50/bbl.

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

Asian refining margins for jet fuel inched higher on Thursday, climbing to their strongest level in more than two months, but surging cases of the highly contagious Omicron coronavirus variant continues to hammer short-term aviation demand.

Refining profit margins or cracks for jet fuel inched up 2 cents to $13.24 per barrel over Dubai crude during Asian trading hours, the highest since Nov. 9.

The jet cracks have gained 25% in the last two weeks, Refinitiv Eikon data showed.

While the emergence of new coronavirus variants pose a risk to the aviation sector outlook, jet fuel demand would likely strengthen from the second quarter of this year as travel curbs ease gradually and more flights return to the skies, market watchers said.

Cash premiums for jet fuel were up 5 cents at 67 cents per barrel to Singapore quotes on Thursday, the highest since Dec. 21.

Meanwhile, cash premiums for gasoil with 10 ppm sulphur content jumped to $1.15 per barrel to Singapore quotes on Thursday, a level not seen since pre-pandemic October 2019.

The gasoil cash differentials, which have surged 64% in the last month, were supported by firmer buying interests for physical cargoes on Thursday amid limited regional supplies.

Singapore’s middle distillate inventories plunged 12% this week to their lowest level in more than eight years, official data showed on Thursday. (Full Story)

Onshore middle distillate stocks slid 976,000 barrels to 7.17 million barrels in the week to Wednesday, according to Enterprise Singapore data. O/SING1

The current stock levels were last seen on Dec. 11, 2013, when they touched a low of 6.8 million barrels. The middle distillate stocks this week were 50.7% lower compared with the year-ago period.

The biggest net exports of automotive diesel from Singapore went to the Philippines at around 40,724 barrels, while 35,322 barrels went to Myanmar, the Enterprise Singapore data showed.

U.S. distillate inventories, which include diesel and heating oil, rose by 2.5 million barrels in the week to Jan. 7, versus expectations for a 1.8 million-barrel rise, the Energy Information Administration said on Wednesday. EIA/S

The February crack for 500 ppm Gasoil is higher at $15.00 /bbl with the 10 ppm crack at $16.00 /bbl. The regrade is at -$1.35 /bbl.

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

Asia’s 0.5% very low-sulphur fuel oil (VLSFO) crack held steady on Thursday as crude oil prices dipped, while the front-month time spread dipped following a recent spike in the backwardation structure.

The VLSFO market has firmed over the past week amid few signs of easing supply tightness for finished-grade VLSFO as blendstock supplies remain thin.

The front-month crack rose 2 cents a barrel from yesterday to $16.75 a barrel above Dubai crude, while the front-month time spread slipped 25 cents to $17.50 a tonne on Thursday, Refinitiv-Eikon data showed.

Onshore fuel oil stocks rose by 1.29 million barrels, or about 202,000 tonnes, to a seven-week high of 22.34 million barrels, or 3.32 million tonnes, in the week to Wednesday, Enterprise Singapore data showed. The increase helped lift residual fuel inventories further away from a three-month low of 19.56 million barrels in the week to Dec. 29. 

The weekly inventories, however, were steady from year-ago levels and slightly below the 2021 weekly average of 22.48 million barrels.

Singapore fuel oil net imports were at a two-week low of 786,000 tonnes in the week to Wednesday, down 19% from the previous week but above the 2021 weekly average of 660,000 tonnes. Weekly figures, however, are volatile.

The largest net imports were from the floating storage hub of Malaysia at 310,000 tonnes, followed by Brazil at 206,000 tonnes and 67,000 tonnes each from Thailand and the United Arab Emirates.

The top net export destinations for Singapore fuel oil were Japan at 58,000 tonnes, followed by New Caledonia at 41,000 tonnes and Papua New Guinea at 20,000 tonnes.

The February crack for 180 cst FO is unchanged at  -$7.55 /bbl with the visco spread at $1.30 /bbl.

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

We shall hedge the Feb 10ppm Gasoil Dubai crack at current levels at 16.00 p

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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