Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices pulled back after touching multi-year highs on Monday, trading mixed as U.S. industrial output for September fell, tempering early enthusiasm about demand.

Brent crude settled down 53 cents or 0.6% at $84.33 a barrel after hitting $86.04, their highest since October 2018.

WTI crude settled settled 16 cents higher, or 0.19%, at $82.44 a barrel, after hitting $83.87, their highest since October 2014.

Production at U.S. factories fell by the most in seven months in September as an ongoing global shortage of semiconductors depressed motor vehicle output, further evidence that supply constraints were hampering economic growth. The weaker industrial data was compounded by rising production expectations on Monday, further weighing on market sentiment.

Oil output from the Permian basin of Texas and New Mexico was expected to rise 62,000 barrels per day (bpd) to 4.8 million bpd next month, the Energy Information Administration said in its drilling productivity report. Total oil output from seven major shale formations was expected to rise 76,000 bpd to 8.29 million bpd in the month.

At a global level, the death toll from the COVID-19 virus rose to 4.92 Million (+4,856 DoD) yesterday. The total number of active cases fell by 100,000 DoD to 17.86 million. (Click here for details).

Asia’s naphtha crack touched a fresh peak as crackers continued to avoid a pricier liquefied petroleum gas (LPG) as feedstock, driving regional demand higher.

The crack climbed to $152.78 per tonne, the strongest level since July 2014, from $151.85 in the last session.

“Fewer cracker works in Europe and Asia and propane’s growing premium over naphtha will ensure flexi-crackers continue to maximise the heavier feedstock through the end of first quarter 2022,” Energy Aspects said in a note.

The November crack is higher at $4.85 / bbl.

Asia’s gasoline crack lingered near its recent multi-year peak on Monday amid recovering demand across the region and a slump in Chinese exports.

The crack rose to $12.31 a barrel from $12.13 on Friday. The refining profit margin touched a four-year high of $12.56 per barrel last week.

China’s gasoline exports slumped nearly 21% to 920,000 tonnes year-on-year in September, data from the General Administration of Customs showed.

Asian gasoline exports for October are expected to decline from September’s total of about 4.5 million metric tonnes, with some 1.7-1.8 million mt accounted for by Oct. 15, assessments by Refinitiv Oil Research showed.

The November crack is higher at $13.15 / bbl.

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

Asia’s cash differentials for 10 ppm gasoil was unchanged at a premium of 53 cents per barrel to Singapore quotes on Friday. 

Asia’s front-month 10-ppm gasoil time spread climbed to a two-year high on Monday, lifted by tight supplies and rising demand for the middle distillate fuel amid a global power crunch. The front-month time spread hit $1.10 a barrel on Monday, up from 98 cents in the previous session and its highest since October 2019, Refinitiv data in Eikon showed.

The gasoil refining margin, however, slipped to $15.40 a barrel above Dubai crude, Refinitiv data showed, as crude oil prices scraped new highs.

China’s diesel and jet exports rebounded in September after touching a more than six-year low in the previous month, as refiners received a fresh batch of fuel export quotas, while jet fuel exports were lifted by improving export margins. The country shipped out 780,000 tonnes of diesel last month, up from 540,000 tonnes in August but 35% lower than levels in the same period last year, data from the General Administration of Customs showed on Monday.

Jet cash differentials fell by 4 cents to a discount of 2 cents per barrel premium.

Jet kerosene exports from China shot up 242% on year to 890,000 tonnes in September, the third-highest monthly rate since May 2020, as Asian refining margins for the aviation fuel hit their strongest levels since the start of 2020 alongside recovering air travel demand.

The November crack for 500 ppm Gasoil is lower at $13.45 /bbl with the 10 ppm crack at $ 15.45 /bbl. The regrade is at $ 0.10 /bbl. 

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

Asia’s high-sulphur fuel oil (HSFO) crack tumbled to a two-month low of $4.32 a barrel below Dubai crude on Monday, Refinitiv data showed, on lower utility consumption with the passing of peak summer demand in the Middle East and South Asia.

In Europe, the more actively traded 380-cst HSFO barge crack also fell on Monday to a three-month low of $11.59 a barrel below Brent crude, Refinitiv data showed.

The November crack for 180 cst FO is lower at  -$3.95 /bbl with the visco spread at $1.40 /bbl.

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

We shall hedge November Gasoline – Dubai crack at current value of $13.15 /bbl. These levels have been seen in less than 3 months in the last 5 years. 

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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