Crude Oil
The one-way move in oil prices snapped on Thursday as some cashed in on this week’s “freeze” trade that sent crude markets higher than they might have otherwise gone.
Brent settled settled down 0.6%, or 41 cents, at $63.93, after briefly breaking above $65 — its highest since January 2020.
WTI crude settled settled down 1%, or 62 cents, at $60.52 per barrel as players took profit on its run to 13-month highs of $62.27 after the Arctic freeze that crippled part of the oil production in Texas, the heartland of U.S. energy.
Texas’s energy outages caused by a deep freeze extended to a 6th day on Thursday, with the impact of reduced supplies also affecting power generation in Mexico, with exports of natural gas via pipeline dropping off by about 75% over the last week.
The Brent Dubai EFS jumped to $2.63/bbl on Thursday, the highest since Jan’20. A wider premium typically encourages refiners to purchase more crude priced off the Middle East benchmark instead of oil from the Atlantic Basin.
DOE DATA
The data from the DOE has to be regarded as support for crude prices notwithstanding the anomalies that the Texan shutdown may have caused. As a matter of fact, the impact of the shutdown on stocks will be felt far more actively in the next week.
The huge draw in crude stocks seems to have been caused by a massive increase in crude exports to a record level of 3.87 mbpd. While this may appear to be a cause for worry, it actually isn’t for two reasons. Basically, it implies that the US is able to plug in the gaps felt by the OPEC cuts. Secondly, if prices stay this high, we can see the US supply return to its peak level of around 13 mbpd.
What appears to be truly heartening is the massive uptick in gasoline demand to a level of 8.4 mbpd. While this may drop quite drastically in the next week, we can hope to see reasonable levels of demand and may even actually have a ‘driving season’ this year.
covid 19
At a global level, the death toll from the COVID-19 virus rose to 2,451,408 (+11,388 DoD) on the 17th of February. The total number of active cases fell by around 60,000 DoD to 22.60 million. (Click here for details)
Naphtha
Asia’s naphtha crack climbed on Thursday, supported by steady petrochemicals demand and expectations for tighter supplies in the coming months. The naphtha crack rose to $97.28 per tonne on Thursday, up from $92.78 per tonne a day earlier.
“Asian naphtha demand is expected to increase by some 2.8 million tonnes year-on-year in the second quarter of 2021 due to strong worldwide ethylene and propylene demand and the region’s production capacity expansion,” Energy Aspects said in a monthly note.
The March crack is higher at $1.75 /bbl
Gasoline
Asia’s gasoline crack rose to $4.71 per barrel on Thursday, up from $4.17 a barrel on Wednesday.
Singapore’s light distillate inventories rose 1.2% to 15.7 million barrels in the week to Feb. 17, according to Enterprise Singapore data.
The March crack is higher at $7.50 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for 10 ppm gasoil inched higher on Thursday, while the front-month spread for the industrial fuel grade widened its backwardated structure. Cash discounts for gasoil with 10 ppm sulphur content narrowed to 1 cent a barrel to Singapore quotes, compared with a 5-cent discount on Wednesday.
The March/April time spread for the benchmark gasoil grade in Singapore traded at 12 cents per barrel on Thursday, Refinitiv Eikon data showed.
Singapore’s middle distillate inventories rose 6.6% to a nine-week high of 15.4 million barrels in the week to Feb. 17, according to Enterprise Singapore data.
Cash differentials for jet fuel were at a discount of 17 cents per barrel to Singapore quotes, compared with a 14 cents per barrel a day earlier.
The March crack for 500 ppm Gasoil is higher at $6.85 /bbl with the 10 ppm crack at $ 8.05 / bbl. The regrade is at -$ 1.35 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month price differentials between 0.5% very low-sulphur fuel oil (VLSFO) and high-sulphur fuel oil (HSFO), also known as the HiLo or sulphur spread, climbed to a fresh 11-month high on Thursday.
VLSFO fundamentals have been supported by tightening supplies and firm demand while the outlook for HSFO has weakened despite signs of firm bunker demand amid expectations of rising supplies as OPEC increased output of heavy crudes, trade sources said.
The front-month HiLo spread climbed to $122.75 a tonne on Thursday, up from $119.50 in the previous session and its highest since March 11, according to Refinitiv data in Eikon.
“The sizeable widening of the Singapore fuel oil sulphur spread since the end of last year, last seen at more than $100 per tonne or roughly double its April-November 2020 average, has improved the economics for scrubber-equipped ships, although the spread remains considerably below the spike in early 2020. According to our estimates, the current spread, if sustained, would be enough to see a new build ship equipped with a scrubber pay back the additional scrubber investment in a little less than a year.” JBC Energy said in a note on Thursday.
VLSFO cash differentials slipped by 91 cents/ MT to $2.87 /MT.
180 cSt HSFO cash differentials were unchanged at $1.01 / MT while the 380 cSt HSFO differentials flipped back into a premium of $0.04 /MT, a gain of cents.
Singapore Onshore fuel oil stocks fell by 1.627 million barrels, or about 256,000 tonnes, to 19.379 million barrels, or 3.052 million tonnes, Enterprise Singapore data showed. Residual fuel stocks were down 20% from a year earlier, the widest year-on-year deficit since December 2018.
The March crack for 180 cst FO is lower at -$3.60 /bbl with the visco spread at $0.85 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action 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.