Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil bulls are discovering that the Russia-OPEC driven crude rally isn’t immune after all to talk of a U.S. recession. Crude prices ended up mixed with Brent in the red even as WTI finished higher.

Brent crude futures settled at $114.24 a. barrel, up $2.90, or 2.4%. It sank to $109 earlier in the day.

WTI crude futures settled at $114.20, up $3.71, or 3.4%. Earlier in the session, WTI fell to as low as $106.28.

The turnaround in crude prices came after Saudi Arabia’s Energy Minister Abdulaziz bin Salman said a dearth of refining capacity in the United States and elsewhere meant that gasoline and other oil products would remain expensive, even if exporters pumped more crude. Abdulaziz’s remarks form a now familiar OPEC+ refrain that there are “physical impediments that no producer can solve.”

The United States is experiencing a severe squeeze in the supply of gasoline, and particularly diesel, from the closure and downsizing of several refineries during the coronavirus pandemic. Refineries that have stayed in the business are now providing only what they can — or, more accurately, what they desire — without putting any money into expanding existing capacity or acquiring the idled plants that can be reopened to provide some measurable relief to consumers. One motivation for the refineries to do this: record profits from the current situation that may be diluted in an expansion. The other is the long turn-around time for any new refinery to deliver a profit.

The number of active oil rigs in the US rose by 6 to 563 according to the closely followed Baker Hughes report at the end of the previous week.

At a global level, the death toll from the COVID-19 virus rose to 6.29 Million (+1,140 DoD) yesterday. The total number of active cases rose by 140,000 DoD to 37.73 million. (Click here for details).

No fresh news on the naphtha markets.

The June crack is lower at -$ 4.20 per barrel 

Asia’s gasoline margin touched a record high on Friday, and posted a weekly gain of more than 16%, on the back of upbeat demand as key economies relax mobility-related pandemic curbs.

The crack climbed to $30.96 a barrel from $27.27 in the previous session, according to Refinitiv data.

The June crack is higher at $33.00 per barrel.

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

Asian refining margins for 10 ppm gasoil slipped on Friday, posting their second consecutive weekly decline, partly weighed down by weaker demand in China due to COVID-19 lockdowns, while cash premiums for the fuel grade dropped on weaker buying interest for physical cargoes

Cash premiums for gasoil with 10 ppm sulphur content fell to $6.59 a barrel to Singapore quotes, compared with $7.46 per barrel on Thursday.

Refining margins, also known as cracks, for 10 ppm gasoil fell to $36.29 a barrel over Dubai crude during Asian trading hours, compared with $40.05 per barrel a day earlier.

Gasoil stocks, held independently in the Amsterdam-Rotterdam-Antwerp refining and storage hub, rose 0.8% to 1.6 million tonnes in the week ended May 12, according to Dutch consultancy Insights Global. ARA jet fuel inventories dropped 6.2% this week to a two-year low of 784,000 tonnes on lower imports and rising holiday demand.

The June crack for 500 ppm Gasoil is lower at $36.35 /bbl with the 10 ppm crack at $37.35 /bbl. The regrade is at -$7.30 /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) climbed on Friday, riding on firmer deals in the physical market, but posted their biggest weekly decline since late January.

Cash differentials for Asia’s 0.5% VLSFO rose to a premium of $19.59 a tonne to Singapore quotes, up from $18.10 per tonne on Thursday. The premiums, however, have shed about 25% in the last week.

The front-month VLSFO crack rose to a two-week high of $22.76 per barrel against Dubai crude during Asian trading hours, buoyed by expectations for tight regional supplies in the near term. The crack was at $21.72 per barrel on Thursday.

Cash premiums for 380-cst high sulphur fuel oil (HSFO) dipped to a premium of $6.01 per tonne to Singapore quotes, while cash differentials for 180-cst HSFO fell to a premium of $14.98 per tonne to Singapore quotes.

The front-month barge crack for 380-cst HSFO traded at a discount of $14.38 a barrel to Brent on Friday, compared with minus $13.77 a barrel in the previous session.

Fuel oil stocks held independently in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub dropped 4.6% to 1.03 million tonnes in the week ended May 12, data from Dutch consultancy Insights Global showed.

The June crack for 180 cst FO is unchanged at – $3.20 /bbl with the visco spread at $4.75 /bbl.

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

We will hedge the June 92 Unleaded-Dubai crack at current levels of $33.00 / bbl. We will also hedge the 10 ppm Gasoil-Dubai crack for Cal 23 at current levels of $ 21.60 / bbl.

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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