Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices hit new highs since 2018 on Wednesday after government supply-demand data showed not only the lowest U.S. crude stockpiles prior to the Covid-19 outbreak but also a huge surprising drawdown in gasoline that attested to a strong run-up to summer driving.

Brent crude hit a 2018 peak, at $76 per barrel, before consolidating to finish the session at $74.50, down 31 cents or 0.4%.

WTI crude soared to as high as $74.25 per barrel, a peak not seen since Oct. 18, before settling at $73.07. While the rise on the day was just 23 cents or 0.3%, WTI gained as much as 2% on the week.

Oil prices gave up their early highs after reports that producer group OPEC+ affirmed it would add 500,000 barrels per day to its August output, after a 440,000-bpd hike in July. For context, the 23-nation OPEC+ coalition kept 7 million bpd or more off the market between April 2020 and March this year, before gradually adding to supply.

 Iran said on Wednesday the US had agreed to remove all sanctions on Iran’s oil and shipping but Washington said “nothing is agreed until everything is agreed” in talks to revive the 2015 Iran nuclear deal.

The share of Middle Eastern crude in India’s oil imports fell to a 25-month low in May’21 of 4.2 MMB/D, tanker data showed, as refiners tapped alternatives in response to the government’s call to diversify supplies.

US factory activity climbed to a record high in Jun’21, with the IHS Markit manufacturing PMI rising to 62.6, but manufacturers are still struggling to secure raw materials and qualified workers, substantially raising prices for both businesses and consumers.

doe Data

We look at the massive crude draw with a bit of circumspection. We are seeing refinery runs down, imports up and exports up. While production has decreased surprisingly, the net effect just cannot be a draw of the order reported in the statistics. See the material balance statement below for more elaboration. 

There is around a 10 million barrel gap between what the stocks should show and what they actually do. So while there may be some operational anomalies, we believe this is too large to ignore.

On the supportive side is the undeniable rise is Gasoline demand pointing to a strong economic recovery. Or, at least, a return to more normal pre Covid life. 

At a global level, the death toll from the COVID-19 virus rose to 3.91 Million (+8,516 DoD) yesterday. The total number of active cases rose fell by around 70,000 DoD to 11.37 million. (Click here for details).

Britain recorded 16,135 new COVID-19 cases on Wednesday, a large jump from a day earlier and the highest figure since early Feb’21, official data showed.

Asia’s naphtha crack also rose to $96.63 per tonne, up from $89.08 per tonne a day earlier.

Naphtha arbitrage economics from Europe into Asia for Jul’21 loadings are expected to edge lower due to weaker olefin margins in Asia and tightness in the European complex, S&P Global Platts reported.

The July crack is higher at $0.40 / bbl

Asia’s gasoline cracks rose for a fourth consecutive session on Wednesday, buoyed by expectations of demand recovery in the coming months as COVID-19 vaccinations help ease mobility restrictions.

The gasoline crack climbed to $5.90 per barrel on Wednesday, the strongest level since June 14. They were at $5.41 per barrel on Tuesday.

Light-distillate inventories in the Fujairah Oil Industry Zone fell 23.7% to 5.4 million barrels in the week to June 21, data via S&P Global Platts showed. Weekly stocks in Fujairah have averaged 6.5 million barrels so far this year, and this week’s inventories were about 34% lower compared with the same period a year earlier, Reuters calculations showed.

The July crack is higher at 8.90 / bbl

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

Cash differentials for gasoil with 10 ppm sulphur content widened their discounts to 6 cents per barrel to Singapore quotes on Wednesday. They were at a discount of 4 cents per barrel on Tuesday.

Middle-distillate inventories in the Fujairah Oil Industry Zone rose 6.6% to 4.3 million barrels in the week ended June 21, data via S&P Global Platts showed. The weekly stocks in Fujairah have averaged 3.9 million barrels this year, compared with 4.2 million barrels in 2020, Reuters calculations showed.

Asia’s cash differentials for jet fuel weakened for a third consecutive session on Wednesday to their biggest discounts in more than a week as aviation demand continues to take a beating from border restrictions in the region.

Cash discounts for jet fuel widened by a cent to 35 cents per barrel to Singapore quotes, the widest since June 11.

The July crack for 500 ppm Gasoil is lower at $6.15 /bbl with the 10 ppm crack at $ 8.15 /bbl. The regrade is at -$ 0.35 /bbl. 

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

Worries over plentiful supplies and limited bunkering demand in the Singapore hub tipped the front-month 0.5% very low-sulphur fuel oil (VLSFO) time spread back into a narrow contango on Wednesday.

The July VLSFO time spread slipped to minus 25 cents a tonne, down from a 25 cent premium in the previous session, Refinitiv data in Eikon showed.

The VLSFO front-month crack to Dubai crude, however, slipped just 3 cents to $11.44 a barrel, the Refinitiv data showed, despite crude oil prices climbing to near two-year highs on Wednesday.

Fujairah Oil Industry Zone inventories for heavy distillates and residues rose by 582,000 barrels, or about 92,000 tonnes, to 12.94 million barrels, or 2.04 million tonnes, data via S&P Global Platts showed. Fujairah’s fuel oil inventories, however, were 23% lower than year-ago levels.

The June crack for 180 cst FO is lower at  -$6.10 /bbl with the visco spread at $1.30 /bbl.

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

No fresh action 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.

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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