Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Crude prices finished the penultimate week of August with double-digit gains that overwrote the crash from a week ago, helped by a hurricane watch and Powell’s indecision over the Fed taper.

Brent Crude futures settled at $72.70 per barrel, up $1.63, or 2.3%. For the week, Brent gained 11.5%, after last week’s 7.7% drop.

U.S. West Texas Intermediate oil settled at $68.74 per barrel, up $1.32, or 2%, on the day. For the week, WTI rose 10.3%, eclipsing last week’s 8.9% drop forced by concerns over a Covid resurgence from the Delta variant.

For WTI, it was the sharpest weekly gain since September 2020, while for Brent, it was the largest weekly gain since May 2020.

Crude prices rallied as U.S. oil and gas companies raced to complete evacuations from offshore platforms on the Gulf of Mexico as Tropical Storm Ida barreled towards the region before making landfall as a category three hurricane. The gulf houses oilfields that provide about 17% of American oil production. Over 45% of total U.S. refining capacity is also located there.

As of Sunday, more than 95% of U.S. Gulf of Mexico oil production was suspended, representing about 1.74 million barrels per day of output, according to the offshore regulator. The Gulf supplies about 17% of the nation’s oil.

The United States is ready to make concessions on some “difficult issues” in the Iran nuclear talks, the lead U.S. negotiator in the talks, Robert Malley, has said as quoted by Bloomberg. Malley’s remarks should spark optimism not in themselves but also because they are a marked departure from earlier comments, made in early August, when the top U.S. negotiator expressed “increasing doubts” a deal would be possible to clinch

The number of active oil rigs in the US rose by 5 to 410, their highest since April 2020.

At a global level, the death toll from the COVID-19 virus rose to 4.51 Million (+7,443 DoD) yesterday. The total number of active cases rose by 20,000 DoD to 18.60 million. (Click here for details).

Asia’s naphtha crack inched lower as ARA stocks rose slightly.

The crack was at $118.80 a tonne, down from $119.18 in the last session. However, the margin rose 4.9% on week.

Naphtha stocks at ARA refining and storage area increased to 380,000 tonnes in the week to Aug. 26 from 336,000 last week.

The September crack is lower at $3.55 / bbl.

Asia’s gasoline crack slipped below $7 a barrel on Friday, hitting a two-month low as Northwest European inventories registered a weekly rise.

The crack dropped to $6.56 per barrel from $7.43 in the previous session, its lowest since late June.

Gasoline stocks held in ARA rose 1.6% to 688,000 tonnes, as exports to West Africa and the United States slowed, Dutch consultancy Insights Global said.

The September crack is lower at $9.45 / bbl.


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

Cash differentials for gasoil with 10 ppm sulphur content rose 3 cents to a premium of 10 cents per barrel to Singapore quotes on Friday.

ARA gasoil inventories fell 2% in the week ended Aug. 26 to 2.06 million tonnes according to Dutch consultancy Insights Global. Jet fuel stocks dropped 3.5% to 984,000 tonnes in the week on high local demand, according to Dutch consultancy Insights Global.

Cash differentials for jet fuel dropped 5 cents to a premium of 2 cents per barrel yesterday.

The September crack for 500 ppm Gasoil is higher at $7.40 /bbl with the 10 ppm crack at $ 8.90 /bbl. The regrade is at -$ 0.70 /bbl. 

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

Asia’s 180-cst high-sulphur fuel oil (HSFO) cargo cash premium soared to their highest level since the start of 2020, more than doubling from the previous session, as tight supplies and strong demand from utilities propelled the market higher.

180-cst HSFO cash premiums jumped to $20.48 a tonne to Singapore quotes on Friday, up from $9.98 a tonne in the previous session.

In the paper market, the front-month 180-cst HSFO time spread soared to a near two-year high of $13.75 a tonne, while the front-month crack against Dubai crude rose to its narrowest discount since December 2020 at minus $1.39 a barrel despite rising crude prices, Refinitiv data showed.

Fuel oil stocks in ARA fell 50,000 tonnes to 1.2 million tonnes in the week ended Aug. 26, data from Dutch consultancy Insights Global (IG) showed. Compared with last year, however, the ARA inventories were 9% higher and on par with the five-year seasonal average of 1.18 million tonnes

The September crack for 180 cst FO is higher at  -$1.85 /bbl with the visco spread at $2.05 /bbl.

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

We will hedge September FO-Dubai crack at current values. With just 2 days left in August we will have to see how it settles out. But, from a Risk Management perspective, it is a compelling hedge.

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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