Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices surged Friday, climbing to new multi-year highs with top producers only gradually increasing global supply despite fuel demand increasing as economies recover from pandemic-induced slowdowns.

Brent crude settled up 46 cents, or 0.5%, at $85.99 per barrel. Brent hit a three-year high of $86.10 on Thursday.

WTI crude settled unchanged at $83.79 per barrel. It hit $85.41 earlier in the session, crossing the $85 mark the first time since October 2014.

The price of oil has more than doubled over the past 12 months as the global economy rebounded from disruption caused by the Covid-19 pandemic, with mobility restrictions gradually being lifted. At the same time, the OPEC + group have been very cautious in adding supply to the global market after severely cutting output in the early stages of the pandemic.

After more than a year of depressed fuel demand, gasoline and distillate consumption is back in line with five-year averages in the United States, the world’s largest fuel consumer.

In India, refiners’ crude oil throughput in September edged higher from the previous month, government data showed on Friday, as refineries boosted output to meet surging demand.

In other related news, U.S. Special Envoy for Iran Robert Malley said that efforts to revive the 2015 Iran nuclear deal were at a “critical phase” and Tehran’s reasons for avoiding talks were wearing thin. Iran, which can add up to 2 million barrels per day of supply to the market, is being withheld by U.S. sanctions over its nuclear program.

At a global level, the death toll from the COVID-19 virus rose to 4.97 Million (+5,223 DoD) yesterday. The total number of active cases fell by 120,000 DoD to 17.90 million. (Click here for details).

Asia’s naphtha crack surged to a more than seven-year high of $160.95 per tonne from $155.10 on Friday. The crack has rallied over 17% this month.

“More naphtha is expected to be drawn into the blending pool as demand for motor fuel ramps up on easing coronavirus restrictions and higher vaccination rates globally,” Refinitiv Oil Research said in a weekly report.

Russia’s Tatneft plans to sell up to 750,000 tonnes of naphtha produced at the TANECO refinery for loading between January 2022 and March 2023, the company reported via an electronic trading platform.

The November crack is higher at $5.45 / bbl.

Asia’s gasoline crack climbed to $15.46 a barrel, the strongest since August 2017, from $14.14 in the last session. The crack has more than doubled this month on the back of recovering demand in the region.

The November crack is higher at $14.90 / bbl.

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

Asian refining margins for 10 ppm gasoil slipped on Monday as crude prices firmed, but traders said tighter regional supplies and recovering industrial demand would cap any major downside in the near term.

Asia’s cash differentials for 10 ppm gasoil fell 6 cents to a premium of 71 cents per barrel to Singapore quotes.

Refining margins, also known as cracks, for 10 ppm gasoil dipped for a sixth consecutive session on Monday to $13.84 per barrel over Dubai crude during Asian trading hours, down from $14.35 a barrel on Friday.

Jet cash differentials fell by 8 cents to a premium of 13 cents per barrel to Singapore quotes.

 

The November crack for 500 ppm Gasoil is higher at $12.50 /bbl with the 10 ppm crack at $ 14.20 /bbl. The regrade is at $ 0.10 /bbl. 

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

Asia’s 0.5% very low-sulphur fuel oil (VLSFO) and high-sulphur fuel oil (HSFO) markets continued to diverge as bullish fundamentals in the VLSFO market stood in contrast to slowing HSFO demand from regional utilities.

The diverging trends pushed the front-month high-low (HiLo) sulphur price spread, the difference between VLSFO and 380-cst HSFO swaps, to over 1-1/2 year highs of $140 a tonne on Friday before scaling back to $136 on Monday, Refinitiv data in Eikon showed.

The November crack for 180 cst FO is lower at  -$6.50 /bbl with the visco spread at $1.70 /bbl.

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

We will hedge November and December Jap Nap Dubai at current values of $5.45 and $5.35 /bbl respectively. We will also hedge the November Gasoline crack at $14.90 per barrel.

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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