Oil rose on Wednesday, touching $90 a barrel for the first time in seven years, supported as tight supply and rising political tensions between Russia and Ukraine added to concerns about further disruption in an already-tight market.
Brent crude futures gained $1.76, or 2%, to settle at $89.96 a barrel, after surpassing $90 for the first time since October 2014.
WTI crude futures gained $1.76, or 2%, to settle at $89.96 a barrel, after surpassing $90 for the first time since October 2014.
Wednesday’s run-up in oil came amid intense speculation that Russia will invade Ukraine despite Moscow’s repeated denials of such intent. This week, American troops were placed on “high alert” for possible deployment to Eastern Europe while NATO dispatched additional ships and fighter jets to the region, in anticipation that the Russia-Ukraine conflict will worsen.
“In markets, narratives are what matter at times, not necessarily hard data,” said John Kilduff, partner at New York energy hedge fund Again Capital. “The narrative in oil now is overwhelmingly skewed to the positive side, helped by geopolitical tensions and the impression of a severely undersupplied market — something that will only be proven months from now.”.
Oil prices edged off their gains in post-settlement trading, retreating with other risk assets like equities after investors interpreted U.S. Federal Reserve Chairman Jerome Powell’s comments in a press conference on expected interest rate hikes as somewhat hawkish.
The data continues to surprise the market when builds when the whole market is saying supply is tight. If it weren’t for the discrepancies shown in our material balance statement below, we would be remarking about the emperor’s new clothes.
Crude and gasoline stocks appear to be showing a draw in the face of reported stock builds. However, we have seen too many discrepancies in the reverse direction as well.
At a global level, the death toll from the COVID-19 virus rose to 5.65 Million (+10,352 DoD) yesterday. The number of daily deaths crossed 10,000 after a very long period. The total number of active cases rose by 1.2 Million DoD to 69.8 million. (Click here for details).
Asia’s naphtha crack gained on Wednesday despite a spike in Middle Eastern inventories, as a rise in crude oil benchmarks boosted prices. The refining profit margin rose to $138.30 a tonne, the highest since Jan. 14, from $132.65 in the last session.
The February crack is higher at $2.10 per barrel.
Asia’s gasoline crack jumped higher to $11.35 per barrel from $10.20 on the previous day.
Light distillates stocks at Fujairah Oil Industry Zone, including gasoline and naphtha, climbed by 799,000 barrels to 5.310 million barrels in the week to Jan. 24, according to industry information service S&P Global Platts.
The February crack is higher at 14.00/bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
cash premiums for gasoil with 10 ppm sulphur content eased to $1.28 a barrel to Singapore quotes, compared with $1.41 in the previous session.
Cash premiums for jet fuel gained on Wednesday as a decline in Middle East stocks boosted sentiment. Cash premiums for jet JET-SIN-DIF rose to 83 cents per barrel to Singapore quotes, compared with 76 cents a barrel in the previous session.
Stocks of middle distillates at the Fujairah Oil Industry Zone, including jet fuel and gasoil, fell by 630,000 barrels on the week to 1.796 million barrels.
The February crack for 500 ppm Gasoil is higher at $15.70 /bbl with the 10 ppm crack at $16.70 /bbl. The regrade is at -$2.00 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s cash premiums for cargoes of 0.5% very low-sulphur fuel oil (VLSFO) fell to a more than two-month low on Wednesday as deal activity in the Singapore window spiked.
VLSFO cash premiums fell to $9.50 a tonne to Singapore quotes, down from $12.40 in the previous session and the lowest since Nov. 19.
VLSFO were always weaker in the paper markets with front-month backwardation falling to a near three-week low of $10.25 a tonne and the front-month crack dropping to a near three-week low of $14.21 a barrel above Dubai crude, Refinitiv-Eikon data showed.
Meanwhile, fuel oil inventories in the Fujairah bunkering and storage hub were down 1% to a two-week low in the week ended Jan. 24, data released on Wednesday showed.
Fujairah Oil Industry Zone inventories for heavy distillates and residues slipped 115,000 barrels, or about 18,000 tonnes, lower to 9.84 million barrels, or 1.55 million tonnes, data via S&P Global Platts showed. Fujairah’s fuel oil inventories were 2% lower than year-ago levels.
The February crack for 180 cst FO is lower at -$5.75 /bbl with the visco spread at $1.65 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
We will hedge February and March Gasoline Dubai cracks at current levels of $14.00 and $14.05 per barrel. We will also hedge 10ppm Gasoil Dubai cracks at current levels of $16.70 and $16.20 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.