Oil edged higher in volatile trade on Friday, and was flat on the week, with prices supported by the prospect of lower Russian exports but pressured by rising inventories in the United States and concerns over global economic activity.
London-traded Brent crude for April delivery did a final trade of $83.23 on Friday, after settling the official session at $83.16 per barrel – up 96 cents, or 1.2%, on the day. Brent fell as much as $1.12 earlier in the session. For the week, the global crude benchmark finished up 13 cents, or nearly flat.
New York-traded WTI for April delivery did a final trade of $76.45 on Friday, after settling the official session at $76.32 per barrel – up 93 cents, or 1.2%, on the day. Earlier in the session, WTI fell as much as $1.28. But after the turnaround, the U.S. crude benchmark finished the week down just 2 cents, practically flat.
Both benchmarks rose about 2% in the previous session on Russia’s plans to cut oil exports from its western ports by up to 25% in March, which exceeded its announced production cuts of 500,000 barrels per day.
Lower trading volumes also contributed to volatility, with Brent trading at 58% and WTI trading at 90% of the previous session’s levels.
On the anniversary of Russia’s invasion of Ukraine, benchmark Brent crude was about 15% lower than a year earlier. It hit a 14-year high of nearly $128 a barrel on Mar. 8, 2022.
An indicator of future supply, U.S. oil rigs fell seven to 600 this week, while the total count was still up 103 rigs, or 15.8%, over this time last year, energy services firm Baker Hughes Co said.
DOE data
Since we couldn’t publish on Friday, we are presenting the DOE data here today. Another huge ‘adjustment’ number sent US crude stocks above the 5 year averages for the first time in a long long while. The large number of the consecutive adjustments did raise a commotion among traders. This may well be justified if you look at our Materail Balance Statement Below.
The crude oil adjustment is perhaps the most frequently misunderstood component of the EIA’s work. Key weekly crude oil quantities are linked through the following balance relationship (This relationship is used to create the Material Balance Statement):
Domestic Production + Imports = Refinery Inputs + Exports + Stock Change
However, the EIA has issued a clarification which, to be honest, has helped us realize that the statement above should be looked at to put all weekly data in perspective.
In comments carried by MarketWatch this week, the EIA’s DeCarolis said in a direct response to the controversy. “Ideally, the adjustment would be zero since the crude oil supplied has to go somewhere, but there is a degree of uncertainty associated with each term, stemming from imprecise statistical sampling and modeling inaccuracies. We’ve had two weeks in a row with large crude oil adjustments indicating undersupply: 2 million bbl/d both weeks. Remember: weekly numbers are highly variable; better to focus on the WPSR 4-week average or PSM.”.
In the Monthly Energy Review, under “stocks”, the EIA has a “preliminary” estimate of 1.61M barrels – virtually matching the 1.6072M reported for the week ended Jan. 27.
Asia’s naphtha markets posted a weekly gain of about 11% amid tight supplies from the West this month, although rising inventories at key trading hubs capped the upside.
The refining profit margin for naphtha inched lower by $1.65 to $112.43 a tonne on Friday.
Naphtha stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage area dropped by 26 KT to 218 KT last week, data from Dutch consultancy Insights Global showed on Thursday.
The March crack is lower at -$2.25 per barrel
Asia’s gasoline refining profit trended upwards at $11.58 a barrel on Friday, but posted a small weekly loss of 3%.
The crack slipped to $11.94 a barrel over Brent crude, compared with $13.16 a barrel a day earlier.
Less export volumes lately from China compared with that of fourth-quarter 2022 are driving gains in gasoline markets, an India-based trader said.
Light distillates stocks at the Fujairah commercial hub rose 1.049 million barrels to 8.233 million barrels in the week ended Feb. 20, S&P Global Commodity Insights data showed.
Gasoline stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage area rose by 19 KT to 1.45 million tonnes last week, data from Dutch consultancy Insights Global showed on Thursday.
The March crack is lower at $12.40 per barrel.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s 10-ppm sulphur gasoil margins snapped a four-week losing streak on Friday as traders expect tighter China supply despite persistently poor demand against a backdrop of cautious trading sentiment.
Gasoil margins saw a rebound as fresh estimates for China exports came in less than 500,000 tonnes for March-loading – with a slew of shutdowns expected in domestic China starting now which could cap gasoil production, one trading source said.
Refining margins for 10 ppm sulphur gasoil closed the session at $22.69 per barrel, down by 29% month-on-month compared with January levels.
Cash differentials for 10 ppm sulphur gasoil continued the decline to $1.07 a barrel, down 63% month-on-month and 14% on the week.
Jet fuel refining margins were firmer 5% week-on-week, closing the trading session at $21.24 per barrel, as positivity on domestic China demand recovery outweighed weakness in the West.
Gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage area rose to a fresh two-year high last week, data from Dutch consultancy Insights Global showed on Thursday. Gasoil stocks are at their highest since Feb 2021 on continued strong imports, which have nevertheless slowed down from recent weeks, said Insights Global’s Lars van Wageningen.
The March crack for 10 ppm Gasoil is higher at $24.50 /bbl. The 10 ppm regrade is at -$1.60 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s spot premium for 0.5% very low sulphur fuel oil eased for a seventh consecutive session to a three-month low on Friday, while Kuwait’s Al Zour closed a term tender in the previous day.
Underpinned by strong supplies, the 0.5% VLSFO cash differential fell further to $5.68 a tonne on Friday.
Fuel oil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub rose 9% to 1.17 million tonnes in the week ended Feb. 23, latest data from Dutch consultancy Insights Global showed.
The March crack for 180 cst FO is lower at – $14.30 /bbl with the visco spread at $3.20 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
We would lay on a 10ppm Gasoil-Dubai hedge for Cal-24 at current levels of $21.60 / barrel. Gasoil stocks round the world have grown tremendously and our experience of the last several months suggests that demand for gasoil at such high levels is unlikely to be sustainable in the larger scheme of things.
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.