Oil’s selloff deepened on Wednesday despite mostly positive inventory data from the U.S. Energy Information Administration, which reported a surprise drawdown in crude stockpiles and larger-than-expected consumption in gasoline balances for last week.
Brent crude futures settled down $2.82, or 2.5%, at $109.11 per barrel. The global crude benchmark has lost 4.5% in two days of trading after rising about 12% in four prior sessions that it took to a one-month high of $114.79 on Monday.
WTI crude futures settled down $2.81, or 2.5%, at $109.59 per barrel. The U.S. crude benchmark has fallen 4% over two days of trading after rising a cumulative 14.5% in four prior sessions that took it to a seven-week high of $114.90 on Monday.
Big Oil followed Big Tech’s renewed tumble on Wednesday as U.S. economic growth concerns, coupled with profit-taking on last week’s rally in energy, took crude prices down despite bullish consumption and stockpiles data released by the government.
“The perception that we could see some more supply coming from Venezuela into the market, along with the equity markets, is causing some profit taking in a much-needed technical correction in the crude,” said Dennis Kissler, senior vice president for trading at BOK Financial.
DOE data
The DOE data reported significant draws in both crude and gasoline as crude exports ramped up and gasoline demand shot up to 9.1 million barrels per day. Even distillate demand shot up by over 300 kbpd and the build appears to be attributable to a drop in exports.
The material balance shows some anomalies as stock production reduced even as refinery runs increased. Therefore, in our estimate, the situation is not that bleak.
At a global level, the death toll from the COVID-19 virus rose to 6.29 Million (+1,602 DoD) yesterday. After yet another recalibration, the total number of active cases rose by 130,000 DoD to 23.97 million. (Click here for details).
No fresh news on the naphtha markets.
The June crack is higher at -$ 5.55 per barrel
Asia’s gasoline crack rose to a record high for a second straight session on Wednesday as U.S. inventories declined and easing COVID-19 curbs in China boosted hopes of fuel demand recovery. The crack climbed to $33.91 a barrel, up $1.88 from last close.
The June crack is lower at $31.60 per barrel.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asian refining margins for jet fuel rose on Wednesday, buoyed by expectations for airline capacity recovering further in coming months, but sluggish aviation demand in China continued to cap gains.
Cash differentials for jet fuel were at a premium of $2.04 a barrel to Singapore quotes, compared with $1.99 per barrel on Tuesday.
Refining margins, also known as cracks, for jet fuel rose to $29.23 per barrel over Dubai crude during Asian trading hours, compared with $27.45 per barrel a day earlier.
Global airline capacity stood at 90.5 million seats in the week to Monday, 17.8% lower compared with the corresponding week in pre-pandemic 2019, but the capacity is expected to exceed 100 million seats within the next couple of weeks, according to aviation data firm OAG.
Total scheduled airline capacity in South Asia rose 0.3% this week, while capacity in Norteast Asia slipped 1.8% from the previous week as Chinese airlines trimmed capacity by 293,000 seats, OAG data showed.
Middle-distillate inventories in the Fujairah Oil Industry Zone fell 11.3% to a two-week low of 1.7 million barrels in the week ended May 16, data via S&P Global Commodity Insights showed. This week’s stocks were 54% lower compared with the corresponding week last year.
The June crack for 500 ppm Gasoil is lower at $33.05 /bbl with the 10 ppm crack at $34.05 /bbl. The regrade is at -$6.55 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s front-month crack for 0.5% very low-sulphur fuel oil (VLSFO) climbed for a fifth consecutive session on Wednesday to its strongest in more than two months, lifted by tight supplies and steady demand.
The VLSFO crack for June jumped to $27.37 a barrel against Dubai crude during Asian trading hours, the highest since March 14. The crack was at $26.18 per barrel on Tuesday.
Cash differentials for Asia’s 0.5% VLSFO were at a premium of $33.84 a tonne to Singapore quotes, compared with $37.56 per tonne a day earlier.
Meanwhile, Asia’s cash premiums for 380-cst high sulphur fuel oil (HSFO) were at $5.16 per tonne to Singapore quotes, as against a premium of $5.97 a tonne on Tuesday.
Cash differentials for 180-cst HSFO flipped to a discount of $3.49 per tonne to Singapore quotes, compared with a premium of 64 cents per tonne in the previous session.
Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues dropped 6.6%, or by 725,000 barrels, from the previous week to 10.3 million barrels (1.5 million tonnes) in the week ended May 16, data via S&P Global Commodity Insights showed. Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were about 24% lower.
The June crack for 180 cst FO is lower at – $4.90 /bbl with the visco spread at $4.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
No fresh trades 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.