Oil prices were little changed on Wednesday as positive U.S inventory data was overshadowed by COVID-related deaths in China, which raised questions about near-term demand in the world’s No.2 oil importer.
Brent crude futures settled down 45 cents, or 0.4%, at $106.80 per barrel. The session low was $104.67.
WTI crude futures settled up 19 cents, or 0.2%, at $102.75, after breaking below the $100 support earlier with a session low at $99.89.
Crude prices initially fell about 2% after the EIA data and rebounded slightly by Wednesday afternoon. Prices tumbled about 5% on Tuesday, ending a four-day rally after the International Monetary Fund slashed its 2022/23 world growth forecasts due to inflation and other economic challenges triggered by Russia’s invasion of Ukraine.
COVID-related deaths in Shanghai, reported to be three on Monday and another seven on Tuesday, have reinforced fears that the pandemic might be returning in a bigger way to China’s second-largest city that has been in lockdown for weeks now.
A slew of Chinese economic data this week confirmed that the world’s second-largest economy has sputtered as the government’s zero-Covid policy clashes with the biggest outbreak of the virus in two years in the second largest economy. Among these were retail sales, which tumbled 3.5% in the year to March, the worst annual drop since 2020; unemployment, which has risen to 5.8%, above the government’s target of 5.5% and the worst since May 2020; and a general slowing down of industrial production.
India’s crude oil production in March 2022 fell to 2,526.11 thousand metric tonnes (TMT), which is 12.49 per cent lower than the target for the month and 3.37 per cent lower than the output recorded during the same month in 2021, the government data showed on Wednesday. Cumulative crude oil production during April-March, 2021-22 stood at 29,690.78 TMT, which is 11.67 per cent and 2.63 per cent lower than target for the period and production during the corresponding period of the last year, respectively, according to data released by the Ministry of Petroleum & Natural Gas.
DOE DATA
Crude stocks showed a huge draw against expectations of a significant build. That was driven by a surge in exports, which rose to 4.3 million barrels per day in the most recent week, the most since March 2020, while imports fell to their lowest since April 2021, a reflection of worldwide demand for crude as Russian exports have fallen since its invasion of Ukraine in February. In fact, our material balance statement suggests the draw should have been twice as much.
It is being reported that shale oil companies are likely to face difficulties raising production to the previous record levels in excess of 13 million barrels per day and drilling companies continue to maintain capital discipline and not invest in more wells.
Our material balance statement also suggests builds in products rather than the draws reported.
At a global level, the death toll from the COVID-19 virus rose to 6.23 Million (+3,271 DoD) yesterday. The total number of active cases fell by 20,000 DoD to 41.75 million. (Click here for details).
Asia’s naphtha and gasoline cracks inched higher on Wednesday as inventories at top supplier, Middle East, declined. The refining profit margin for naphtha rose to $102.48 per tonne, up 95 cents from the last close.
The May crack is lower at -$ 1.35 per barrel
Asia’s gasoline crack gained 47 cents at 16.94 a barrel amid firm festive demand.
Stocks of light distillates at the Fujairah Oil Industry Zone decreased by 988,000 barrels to a two-week low of 3.944 million barrels in the week ended April 18, according to industry information service S&P Global Commodity Insights.
The May crack is higher at $20.35 per barrel.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asian refining margins for jet fuel rose on Wednesday, despite firmer raw material crude prices, as airlines across the globe continue to add capacity to their schedules for coming months with more international flights returning to the skies.
Refining margins, also known as cracks, for jet fuel climbed to $31.80 per barrel over Dubai crude during Asian trading hours, up from $31.17 per barrel a day earlier. Cash premiums for jet fuel were at $2.10 a barrel to Singapore quotes on Wednesday, compared with $2.28 a barrel on Tuesday.
“Internationally, 12 regions of 17 have seen capacity increase (this week), with the strongest growth in South East Asia, where carriers have increased capacity by 4.3% on last week, adding 44,000 seats,” aviation data firm OAG said in a statement. Global airline capacity rose 0.6% in the week to Monday to 85.7 million seats, 22% lower compared with the corresponding week in pre-pandemic 2019, OAG data showed. Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 1.2% to a six-week low of 1.2 million barrels in the week ended April 18, data via S&P Global Commodity Insights showed.
The May crack for 500 ppm Gasoil is higher at $42.45 /bbl with the 10 ppm crack at $43.45 /bbl. The regrade is at -$10.45 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s cash premiums for 380-cst high-sulphur fuel oil (HSFO) rose for a third straight session on Wednesday to hit a fresh high since November 2019, lifted by strong demand amid limited supplies. The cash differentials for 380-cst HSFO rose to a premium of $30.17 per tonne to Singapore quotes, up from $25.31 per tonne a day earlier.
Cash premiums for 180-cst HSFO soared to $46.82 per tonne to Singapore quotes on Wednesday, compared with $40.15 a tonne on Tuesday.
Meanwhile, cash premiums for Asia’s 0.5% VLSFO slipped to $19.26 a tonne to Singapore quotes on Wednesday, compared with $20.92 per tonne a day earlier.
Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues rose 8.6%, or by 948,000 barrels, from the previous week to 11.9 million barrels (1.8 million tonnes) in the week ended April 18, data via S&P Global Platts showed. Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were about 8% lower.
The May crack for 180 cst FO is higher at $1.75 /bbl with the visco spread at $4.80 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
The regrade (Kero – Gasoil 10 ppm) for May, which we purchased yesterday at levels of -$8.00 has blown out further to -$10.45. We would recommend purchasing one more tranche at this level. We will also hedge another tranche of the entire gasoil strip out to Cal-23 and the unleaded gasoline crack for June-22
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.