Oil prices rose 2% Wednesday as market participants focused on another larger-than-expected weekly crude draw caused by Hurricane Ida-related disruptions, while ignoring a surprise gasoline build.
Brent crude futures settled up $1.83, or 2.5%, to $76.19 a barrel. US West Texas Intermediate (WTI) futures rose $1.74, or 2.5%, to $72.23 per barrel.
Also supporting prices has been difficulties by OPEC members struggling to raise output. Rising prices in other markets like natural gas have also supported oil, with energy market shortages causing a supply crunch in Europe and Asia.
Indian refiners’ crude oil throughput in August dipped to its lowest in 10 months due to ongoing maintenance activities at multiple refineries, government data showed on Wednesday. Refiners processed 4.36 million barrels per day (18.44 million tonnes) of crude oil last month, the lowest since October 2020 and about 4.8% lower than 4.58 million bpd processed in July. On a year-on-year basis, however, refiners’ crude oil throughput in August jumped about 14.2%, while crude oil production fell about 2.3% to 596,000 bpd (2.52 million tonnes), the data showed.
The U.S. Federal Reserve, which began a two-day policy meeting on Tuesday, signaled interest rate increases may follow more quickly than expected. Tightening monetary policy could cut investor tolerance for riskier assets such as oil.
Oil facilities in the Gulf of Mexico continue to return to production, with weekly output rising 500,000 bpd in the most recent week to 10.6 million bpd, the EIA said. BP on Wednesday said all four of its offshore facilities in the region have resumed operations after Hurricane Ida, brought back online and producing as of Sept. 12. As of Wednesday, some 16% of oil production on the Gulf, accounting for 320,909 barrels equivalent, remained shut-in due to complications caused by the storm.
Gasoline stocks also burgeoned as a drop in gasoline demand bolstered stock levels
The crude draw is attributed to an increase in run rates. However, our Material Balance statement suggests crude stocks may have actually built, or should have been neutral.
While crude consumption increased by 960 kbd (due to an increase in run rates) and exports increased by 185 kbd, production increased by 500 kbd and imports increased by 700 kbd. The net impact of these changes ought to be marginally positive. This continuous discrepancy in the reports continues to puzzle us.
At a global level, the death toll from the COVID-19 virus rose to 4.73 Million (+9,292 DoD) yesterday. The total number of active cases rose by 10,000 DoD to 18.57 million. (Click here for details).
Asia’s naphtha crack eased from five-week highs after data showed a 1.2% increase in stockpiles at the Fujairah Oil Industry Zone.
The crack fell to $139.90 a tonne from $141.43 in the previous session.
“Rising naphtha prices risk to erode cracker margins, adding downside risks to cracker runs in Asia and Europe,” Vortexa said in a note to clients.
The October crack is lower at $4.10 / bbl.
Asia’s gasoline crack gained for a second straight session on Wednesday on hopes of a weekly decline in U.S. inventories, while a series of trades on the window lifted prices for the benchmark 92-octane grade.
The crack climbed to $7.72 a barrel from $7.36 in the last session.
Stocks of light distillates in Fujairah, including gasoline and naphtha, rose by 60,000 barrels on the week to 4.957 million barrels.
The October crack is higher at $9.00 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash differentials for gasoil with 10 ppm sulphur rose 5 cents to a premium of 50 cents per barrel to Singapore quotes, a level not seen since July last year.
Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 21.8% to a six-week low of 3.1 million barrels in the week ended Sept. 20, data via S&P Global Platts showed.
Asia’s cash discounts for jet fuel narrowed on Wednesday amid active buying interests for physical cargoes, while traders were hopeful the market would gather strength in the coming months as winter heating demand for kerosene picks up ahead of winter.
Asia’s cash differentials for jet fuel were at a discount of 1 cent per barrel to Singapore quotes, compared with a discount of 6 cents per barrel a day earlier.
Refining margins for jet fuel, which also determine the profitability of closely-related kerosene, jumped to $8.27 per barrel over Dubai crude during Asian trading hours, the strongest since March 2020. The cracks were at $7.91 per barrel on Tuesday.
The Oct/Nov time spread for the aviation fuel in Singapore, which flipped into a backwardation last week, traded at 7 cents per barrel on Wednesday.
The October crack for 500 ppm Gasoil is higher at $9.45 /bbl with the 10 ppm crack at $ 10.95 /bbl. The regrade is at -$ 1.00 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s front-month 0.5% very low-sulphur fuel oil (VLSFO) crack fell on Wednesday, retreating from a three-month high hit in the previous session on ample supplies and rising crude prices.
The front-month crack fell to $12.95 a barrel above Dubai crude, from $13.33 a barrel on Tuesday, Refinitiv data in Eikon showed.
Fujairah Oil Industry Zone inventories for heavy distillates and residues fell by 491,000 barrels, or about 77,000 tonnes, to 6.98 million barrels, or 1.1 million tonnes, data via S&P Global Platts showed. Fujairah’s fuel oil inventories were 31% lower than year-ago levels.
The October crack for 180 cst FO is higher at +$0.05 /bbl with the visco spread at $3.00 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
We shall hedge October FO-Dubai at today’s level of +0.05.
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.