Crude OilNaphthaGasolineDisitllatesFuel OilHedge Strategy

Crude prices jumped almost 4% Tuesday as the bulls played up for a second day remarks by Saudi Arabia’s Energy Minister Abdulaziz bin Salman that the kingdom could cut production “anytime” at the OPEC+ oil producing coalition that it controlled.

Brent settled settled up $3.53, or about 3.7%, at $100.23. Brent is down more than 8% since the start of August, after a 6.5% drop in July and slide of more than 4% in June.

WTI settled up $3.38, or 3.7%, at 93.74 a barrel. WTI fell to as low as $86.60 on Monday. WTI remains down almost 6% since the start of August, extending the back-to-back loss of more than 7% in July and June.

The oil market is witnessing a tug of war between two narratives — the Saudis (bull) and the Iranians (bear). At the moment, the Saudi narrative is winning.

Iran had earlier dropped another bomb — metaphorically — on the market when it gave up a key condition barring the inspection of its sites that it had previously insisted on during negotiations aimed at reinstating its 2015 nuclear deal with world powers. The agreement from seven years ago is critical to ending U.S. sanctions on Iranian oil exports, to pave the way for Tehran’s legitimate return to the oil market.

Still, the narrative of a nuclear deal reinstatement for Iran was overpowered by the threat the Saudis could muscle in on OPEC+, forcing it to slash production to mitigate the barrels Tehran would bring.

API Data

The API reported a far greater draw in crude stocks than market expectations. However, product builds continued to make the data ambiguous. We will await official data later today.

Asia’s naphtha margin dropped on Tuesday amid poor demand outlook from China and lower consumption from regional petrochemical units, traders and analysts said. The crack dipped to a discount of $45.33 a tonne, the lowest since July 29, from a discount of $34.10 a tonne a day earlier. On Tuesday, the front-month first-half October naphtha was $3.50 a tonne cheaper than the following month.

“Petrochemical demand could face further headwinds as a heat wave across China has led to rationing of electricity supplied to the industrial sector, forcing manufacturers of plastic, electronics and other factories to operate at limited capacity,” Krystal Chung, senior analyst of light distillates at Refinitiv Oil Research said.

The September crack is lower at -$ 19.20 per barrel 

Asia’s gasoline crack gasoline crack in the region edged lower at $14.34 a barrel from $14.52 a barrel on Monday.

Taiwan’s Formosa Petrochemical Corp has shut one of the two fluid catalytic cracker (FCC) units at its Mailiao refinery since Monday due to water leaking in a carbon monoxide boiler. The outage of the 84,000 barrel-per-day FCC unit is expected to last two to three weeks, and may affect some September-loading gasoline cargoes, said the company’s spokesman K.Y. Lin.

The September crack is much lower at $11.00 per barrel.

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

Asia’s refining margins for gasoil with 10 ppm sulphur content climbed higher on Tuesday as expectations of tight supply in Europe following impending sanctions deadlines weighed on sentiment.

Cash differentials for 10 ppm gasoil stood at a premium of $1.40 a barrel to Singapore quotes, up from $1.09 in the previous session.

Refining margins or cracks for 10 ppm gasoil rose to $52.72 a barrel over Dubai crude in Asian trading hours, hitting their highest since early July, compared with $48.81 on Monday.

Cash differentials for jet rose to a premium of 17 cents a barrel to Singapore quotes, up from a premium of 11 cents in the previous session.

Refining margins for jet fuel rose to $46.62 a barrel over Dubai crude during Asian trading hours, hitting their highest since early July, compared with $43.11 on Monday.

The September crack for 500 ppm Gasoil is higher at $46.50 /bbl with the 10 ppm crack $50.50 /bbl. The 10 ppm regrade is at -$5.90 /bbl.

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

Asia’s cash premium for 0.5% very low sulphur fuel oil (VLSFO) dipped towards six-month lows on Tuesday as ample arrivals of arbitrage and regional cargoes kept the market suppressed. The spot cash differential for 0.5% VLSFO remains under pressure, sliding 70 cents to a premium of $13.87 per tonne over Singapore quotes.

Refining margins for the low-sulphur grade have also trended softer. The front-month 0.5% VLSFO crack averaged $14.80 per barrel in August so far, down from $25.50 per barrel in July.

The high-sulphur fuel oil (HSFO) market also retained downward pressure in recent trading sessions, with the 380-cst cash differential declining $1.98 to $4.33 per tonne on Tuesday.

The September crack for 180 cst FO is lower at – $18.05 /bbl with the visco spread at $3.20 /bbl.

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

We shall hedge Cal 23 10 ppm Dubai crack at current level of $ 32.30 per bbl.

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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