Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices rose on Monday with investors betting that global supply will remain tight, although restraint by major producers was partially offset by a rise in Libyan output.

Brent crude futures settled settled up 42 cents, or 0.5%, to $86.48 a barrel. Earlier in the session, the contract touched its highest price since Oct. 3, 2018, at $86.71.

WTI crude futures were up 53 cents, or 0.6%, at $84.35 after touching its highest price since Nov. 10 at $84.78. Trade was subdued due to the U.S. holiday honoring slain civil rights leader Martin Luther King Jr.

Libya’s total oil output is back to 1.2 million barrels per day (bpd), according to National Oil Corp. Libyan output was about 900,000 bpd last week owing to a blockade of western oilfields.

Sources told Reuters that China plans to release oil reserves around the Lunar New Year holidays between Jan. 31 and Feb. 6 as part of a plan coordinated by the United States to reduce global prices.

At a global level, the death toll from the COVID-19 virus rose to 5.57 Million (+5,286 DoD) yesterday. The total number of active cases rose by 700,000 DoD to 60.8 million. (Click here for details).

Asia’s naphtha crack plunged on Monday, snapping a six-session rally, as demand from petrochemical units dwindled. The refining profit margin slipped to $134.98 a tonne, down $8.80 from Friday’s close. A rise in crude oil benchmarks also piled pressure on naphtha margins.

“The loss in naphtha demand has deepened further as more petrochemical producers in the region announced plans to lower run rates,” Refinitiv Oil Research said in a note. Two South Korean petrochemical operators have slashed run rates at their ethylene crackers to 70-85% last week, Refinitiv said.

The February crack is lower at $1.80 per barrel. 

Asia’s gasoline crack inched lower to $10.79 a barrel from $10.87 in the last session.

“We expect first-quarter global (gasoline) demand to grow by 1.44 million barrel per day year-on-year, even with a weaker outlook because of Omicron, and will still exceed supply by 0.42 million barrel per day,” consultancy Energy Aspects said in a report.

The February crack is higher at 12.60/bbl.

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

Asia’s cash premiums for 10 ppm gasoil rose to their highest level since October 2019 on Monday, supported by signs of tightness in regional supply amid falling inventories.

Cash premiums for gasoil with 10 ppm sulphur content climbed to $1.23 a barrel to Singapore quotes, compared with $1.15 per barrel on Friday.

Asian cracks for 10 ppm gasoil rose to a more than two-year high of $16.46 a barrel over Dubai crude during Asian trading hours, up from $15.54 per barrel in the last session.

“Gasoil and jet fuel inventories in the East of Suez have shed more barrels last week, reaching a new post-pandemic low,” consultancy JBC Energy said in a note.

Cash differentials for jet fuel also rose to a premium of 90 cents per barrel to Singapore quotes, from 81 cents on Friday.

The February crack for 500 ppm Gasoil is higher at $15.75 /bbl with the 10 ppm crack at $16.75 /bbl. The regrade is at -$1.50 /bbl.

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

The cash differential for VLSFO cargoes tumbled last week amid signs of improved prompt supplies but trade sources said they expected finished grade stocks of the mainstay marine fuel to remain limited over the near term.

The cash differential climbed to $11.20 a tonne to Singapore quotes, up 11 cents from the previous session. 

In the paper market, the front-month time spread and front-month crack were both higher at $17 per tonne and $17.08 per barrel above Dubai crude, respectively, Refinitiv Eikon data showed.

Oil prices were steady on Monday, as investor bets that global supply will remain tight amid restraint by major producers were offset by a rise in Libyan output. 

In the high-sulphur fuel oil (HSFO) market, cash differentials for 180-cst cargoes were also bid higher at a three-month high of $3.10 per tonne to Singapore quotes on firm utility demand and tight supply.

The February crack for 180 cst FO is higher at  -$7.20 /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 Mar 10ppm Gasoil Dubai crack at current levels at 16.05 per barrel.

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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