Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Crude prices fell below $100 / bbl for the second time in two weeks (albeit only briefly for Brent) as USD strength and China slowdown fears grappled with sanctions on Russia and OPEC controls.

Brent crude futures settled down $4.33, or 4.1%, at $102.32 per barrel on Monday, after an intraday low at $99.26. The drop came on top of last week’s slide of 4.5% in Brent. Unless it doesn’t lose anymore from here, Brent could end April in the red. That would be its first negative month since this year’s phenomenal oil rally that sent the benchmark to as high as $139.15 on March 7, two weeks after the invasion of Ukraine that led to swift Western sanctions on Russia that further squeezed the global supply of oil.

WTI crude futures settled down $3.53, or 3.5%, at $98.54. Like Brent, WTI fell 4.5% last week, showing a month-to-date loss of 4%. WTI shot to as high as $130.50 on March 7.

Up until two weeks ago, the West’s sanctions on Russian oil — and a potential EU ban to follow as proof of the US-Europe-Canada alliance against Moscow’s invasion of Ukraine — had been the single biggest factor in oil.

While that essentially hasn’t changed, a China Covid 2.0 situation is introducing a different dynamic to oil due to reduced mobility in the world’s largest importer of the commodity.

The Dollar Index, which pits the U.S. currency against six major rivals, hit a 25-month high of 101.745 on Monday on expectations the Federal Reserve would adopt a 50 basis point, or half percentage point, hike at its May policy meeting next week. That would be double the 25 bps, or quarter point, it approved in March for the first pandemic-era U.S. rate increase.

At a global level, the death toll from the COVID-19 virus rose to 6.24 Million (+1,013 DoD) yesterday. The total number of active cases fell by 540,000 DoD to 41.67 million. (Click here for details).

A fresh outbreak of Covid cases in Chinese capital Beijing dominated headlines on the pandemic after 47 cases found since Friday in the Chinese capital sparked the testing of millions of people for the virus, in a move that shut down residential and business districts.

Shanghai, which has been locked down for more than two weeks, reported more than 19,000 new infections and 51 deaths in the latest 24-hour period, pushing its death toll from the ongoing outbreak to more than 100.

Besides China, the United States appears to be having a mini Covid resurgence too, with a rise lately in cases of the BA.2 variant, and two new sub-variants — called BA.2.12 and BA.2.12.1 — that appear to be even more infectious. The U.S. is averaging 46,925 cases a day, according to a New York Times tracker, up 51% from two weeks ago.

Asia’s naphtha crack slumped to its lowest since April 2021 on Monday amid dwindling feedstock demand from petrochemical crackers.

The crack plunged to $86.72 a tonne, down $9.23 from the last close. Naphtha markets weakened by more than 25% last week after regional flexi-crackers continued to operate on reduced run rates.

Market watchers said physical premiums for high-paraffinic spot naphtha cargoes had dropped from over $20 per tonne in early March to single-digits for late-May delivery.

“We expect physical premiums to remain at these levels as weak cracker demand mutes Asian buying appetite through May,” consultancy Energy Aspects said in a report.

The May crack is lower at -$ 2.30 per barrel 

Asia’s gasoline crack eased by 54 cents to $19.14 a barrel.

The May crack is higher at $22.85 per barrel.

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

Asian refining margins for 10 ppm gasoil climbed on Monday, lifted by weaker raw material crude prices and tight supplies, while cash premiums for the industrial fuel grade inched up as the front-month spread widened its backwardated structure.

Cash differentials for gasoil with 10 ppm sulphur content were at a premium of $7.78 a barrel to Singapore quotes on Monday, compared with $7.76 per barrel at the end of last week.

Refining margins, also known as cracks, for 10 ppm gasoil rose to $40.54 a barrel over Dubai crude during Asian trading hours, from $39.43 per barrel on Friday.

The May/June time spread for 10 ppm gasoil traded at $8.25 per barrel on Monday, as against $7.40 a barrel on Friday.

The May crack for 500 ppm Gasoil is higher at $43.00 /bbl with the 10 ppm crack at $44.00 /bbl. The regrade is at -$10.00 /bbl.

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

Asia’s cash premiums for 0.5% very low-sulphur fuel oil (VLSFO) slipped on Monday, weighed down by weaker buying interests for physical cargoes.

Cash differentials for Asia’s 0.5% VLSFO were at a premium of $22.15 a tonne to Singapore quotes, compared with $22.55 per tonne on Friday.

The front-month VLSFO crack dipped to $20.54 per barrel against Dubai crude during Asian trade on Monday, compared with $21.22 per barrel at the end of last week.

Cash premiums for 380-cst high sulphur fuel oil (HSFO) were at a premium of $26.26 per tonne to Singapore quotes, while cash differentials for 180-cst HSFO rose to a premium of $37.69 per tonne to Singapore quotes.

The May crack for 180 cst FO is higher at $1.00 /bbl with the visco spread at $4.60 /bbl.

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

We shall lay on a fresh tranche of 10ppm Gasoil Dubai for May and June 22 at current levels of $ 44.00 / bbl and $ 37.00/ bbl respectively.

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

Leave a Comment