Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil continued its relentless climb higher on Tuesday, helped by a deadly air raid on major producer UAE and  a robust consumption forecast from OPEC that left impending weekly U.S. inventory data as the last piece of the demand jigsaw puzzle.

Brent crude futures settled up $1.03, or 1.2%, at $87.51 per barrel, after a seven-year high at $88.12. Brent is around 13% up for 2022.

WTI crude futures settled  up $1.61, or 1.9%, at $85.43 per barrel for its highest close since October 2014. Like Brent, WTI is also up about 13% since the start of the year.

The Iran-allied Houthi movement launched drone and missile strikes on Sunday which set off explosions in fuel trucks in the United Arab Emirates that killed three people, and warned that it will target more facilities, prompting Abu Dhabi to say that it reserved the right to “respond to these terrorist attacks.”

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 1.3 Million DoD to 58.7 million. The data has been recalibrated overnight(Click here for details).

Asia’s naphtha crack dropped on Tuesday for a second consecutive session on concerns of waning demand from petrochemical crackers amid recovering supplies from the West.

The refining profit margin plunged to $129.35 a tonne, the lowest since Jan. 6, from $134.98 in the last session. Naphtha margins also came under pressure due to a spike in crude oil benchmarks.

Western arbitrage arrivals in January are set to jump to their highest level in five months at about 2.4 million metric tonnes, according to assessments by Refintiv Oil Research.

The February crack is lower at $1.15 per barrel. 

Asia’s gasoline crack rose to $11.07 per barrel, up 28 cents from the previous close, on hopes of a smaller-than-expected impact of the Omicron coronavirus variant on fuel demand.

China’s gasoline exports were 940,000 tonnes, rising from November’s 810,000 tonnes but down 35% from the same period last year, data from the General Administration of Customs showed.

The February crack is lower at 12.05/bbl.

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

Asia’s cash premiums for 10 ppm gasoil inched higher on Tuesday, rising for a fourth straight day, buoyed by tightening inventory levels in global markets amid increasing industrial demand.

Cash premiums for gasoil with 10 ppm sulphur content climbed to $1.24 a barrel to Singapore quotes, compared with $1.23 per barrel in the last session.

“Across the key diesel storage hubs – the ARA region, Fujairah and Singapore – diesel inventories are challenging their historical lows as refinery supplies struggle to keep pace with demand,” Serena Huang, analyst at the consultancy Vortexa, said in a note.

On supply side, China’s diesel exports in December sank to their lowest monthly level since March 2015, government data showed.

The February crack for 500 ppm Gasoil is lower at $15.30 /bbl with the 10 ppm crack at $16.30 /bbl. The regrade is at -$1.70 /bbl.

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

Despite surging crude oil prices on Tuesday, Asia’s 0.5% very low-sulphur fuel oil (VLSFO) refining margin climbed to a near two-year high, buoyed by tight supplies of the finished grade fuel and firm demand.

The front-month VLSFO crack climbed to $17.99 a barrel above Dubai crude on Tuesday, up from $17.08 a barrel in the previous session and its highest since Feb. 13, 2020, Refinitiv Eikon data showed.

In a sign of tight supplies, the front-month time spread also climbed to a near three-week high of $18.75 a tonne on Tuesday, the data showed.

Benchmark oil prices climbed to their highest level since 2014 on Tuesday, as possible supply disruption after attacks in the Mideast Gulf added to an already tight supply outlook. 

The February crack for 180 cst FO is higher at  -$6.50 /bbl with the visco spread at $2.40 /bbl.

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

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.

Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity

Leave a Comment