Crude prices fell 2% on Wednesday as the possibility of Iran holding nuclear talks with Western powers returned to headlines, amid Tehran’s bid to free itself from U.S. sanctions prohibiting the sales of its oil to the world.
Brent crude finished the session down $1.82, or 2.1%, at $84.58 per barrel. Brent hit a three-year high of $86.70 on Monday.
WTI crude settled down $1.99, or 2.4%, at $82.66 per barrel. It was the largest one-day dip in three weeks for the WTI, which hit a seven-year high of $85.41 on Monday.
For perspective, over the past 10 weeks, any daily correction of 1-2% on WTI or Brent has often been overturned by a 4-5% surge by the end of the week. While the current narrative in oil is overwhelmingly bullish, often the littlest of positive developments are magnified by those on the long side of the trade to blow the rally out of proportion.
DOE Data
The DOE reported a surprisingly large build in crude stocks, one that was corroborated by our material balance statement for a change.
While U.S. crude inventories may have risen in the latest week, stockpiles at the Cushing, Oklahoma storage hub — a more important metric sometimes to the market — fell to a new three-year low. In Cushing, almost 4.0 million barrels of crude vanished last week. As long as there aren’t adequate weekly fills at Cushing, any hope of balancing crude supply with product demand will be futile.
Gasoline stocks are at levels not seen in nearly four years, as U.S. consumers grapple with rising prices to fill their vehicles’ tanks.
The draw in distillates is anomalous given what our material balance statement shows. The difference is large enough to make one wonder.
At a global level, the death toll from the COVID-19 virus rose to 4.99 Million (+8,597 DoD) yesterday. The total number of active cases rose by 80,000 DoD to 17.94 million. (Click here for details).
Asia’s naphtha crack eased on Wednesday, but remained strong near seven-year highs amid strong consumption growth from petrochemical units.
The crack eased to $155.48 a tonne from $163.63 in the last session. The refining profit margin for naphtha has risen over 15% in September.
Indian private refiner Nayara Energy expects 15 to 20 new integrated petrochemical plants to start operating in the country in the next decade to meet rising demand for raw materials used in the plastics and clothing industries, a senior company official said.
The November crack is lower at $4.60 / bbl.
Asia’s gasoline crack surged above $18 a barrel as regional demand remained strong with the easing of COVID-19 curbs amid tighter supplies from China.
The crack climbed to $18.72 a barrel, the strongest since June 2015, from $17.40 in the last session.
Stocks of light distillates at Fujairah Oil Industry Zone, including gasoline and naphtha, grew a nominal 0.6% on the week to 5.068 million barrels.
The November crack has crashed to $13.25 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asian refining margins for 10 ppm gasoil dipped on Wednesday, but hovered near multi-month highs hit earlier this month as lower Chinese exports and firming Indian demand kept the regional market tight in supplies.
Asia’s cash differentials for 10 ppm gasoil fell 4 cents to a premium of 63 cents per barrel to Singapore quotes.
Refining margins, also known as cracks, for 10 ppm gasoil inched down to $13.93 per barrel over Dubai crude during Asian trading hours, compared with $14.12 per barrel a day earlier.
“China’s shock departure from the export market upends a lot of the narrative that has prevailed for months… With shipments this month pointing towards as little as 75,000 barrels per day, the market is experiencing acute withdrawal symptoms,” consultancy Energy Aspects said in a note.
Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 16.8% to a two-week low of 2.9 million barrels in the week ended Oct. 25, data via S&P Global Platts showed.
Cash differentials for jet fuel were at a premium of 10 cents per barrel to Singapore quotes on Tuesday, as against a 8-cent premium on Tuesday.
The November crack for 500 ppm Gasoil is lower at $11.80 /bbl with the 10 ppm crack at $ 13.30 /bbl. The regrade is at -$ 0.10 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s high-low (HiLo) sulphur price spread hit a near two-year high on Wednesday amid sustained weakness in the high-sulphur fuel oil (HSFO) due to weaker-than-expected demand from regional utilities.
The front-month HiLo sulphur price spread, the difference between front-month 0.5% very low-sulphur fuel oil (VLSFO) and 380-cst HSFO swaps, climbed on Wednesday to $144.50 a tonne from $136.75 a tonne in the previous session and the highest since February 2020, Refinitiv data showed.
While the VLSFO market was largely steady, the front-month 0.5% VLSFO crack fell to $12.66 a barrel above Dubai crude, down from $12.74 on Tuesday, despite weaker crude oil prices.
Fujairah Oil Industry Zone inventories for heavy distillates and residues were 44,000 barrels, or about 7,000 tonnes, lower to 7.71 million barrels, or 1.21 million tonnes, data via S&P Global Platts showed. The inventories were 23% lower than year-ago levels.
The November crack for 180 cst FO is lower at -$9.35 /bbl with the visco spread at $1.95 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
No Fresh trades 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.
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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.