Crude OilCovid StatsNaphthaGasolineDisitllatesFuel OilHedge Strategy

Oil prices rose on Friday, closing out the week with gains ahead of the U.S. Memorial Day holiday weekend, the start of peak U.S. demand season, and as European nations negotiate over whether to impose an outright ban on Russian crude oil.

Brent crude futures rose $2.03, or 1.7%, to settle at $119.43. WTI crude rose 98 cents, or 0.9%, to settle at $115.07 a barrel. For the week, Brent rose 6% while WTI gained 1.5%.

Prices drew support from strong worldwide demand for fuel, with both gasoline and heating oil futures outpacing crude this year.

European Union countries are negotiating a deal on Russian oil sanctions that would embargo shipment deliveries but delay sanctions on oil delivered by pipeline to win over Hungary and other landlocked member states, officials said.

Iranian forces seized two Greek oil tankers on Friday in the Persian Gulf, which has also made investors wary of being short going into the weekend, said Phil Flynn, an analyst at Price Futures Group.

The number of active oil rigs in the US fell by 2 to 574 according to data published by Baker-Hughes.

At a global level, the death toll from the COVID-19 virus rose to 6.31 Million (+552 DoD) yesterday. The total number of active cases fell by 150,000 DoD to 22.91 million. (Click here for details).

Asia’s naphtha markets weakened for a sixth consecutive session on Thursday, and flipped into contango structure by $1 after inventories at the key trading hub of Singapore rose to an over three-month high.

The crack dropped to $6.15 a tonne, the lowest level since May 2020 and down $9.63 from the last close.

Naphtha margins have shed over 92% this month due to poor demand from petrochemical units in the region and dwindling Chinese consumption as an aftermath of COVID-19 lockdowns, while supplies remain abundant.

The June crack is lower at -$ 12.45 per barrel 

Asia’s gasoline crack in the region climbed to $28.27 a barrel from $26.20 on Thursday amid robust driving season consumption.

“Looking ahead, we may see global gasoline cracks cool somewhat similar to middle distillates as supply increases on the back of a strong pick up in refinery runs amid this high margin environment,” energy consultancy Vortexa said in a note. 

The June crack is higher at $32.50 per barrel.

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

Asian refining margins for 10 ppm gasoil climbed for a fourth straight session on Friday, posting their first weekly rise in four, partly lifted by expectations for recovering demand in China as Shanghai gears up to come out of lockdown in the coming days.

Cash differentials for gasoil with 10 ppm sulphur content were at a premium of $4.38 a barrel to Singapore quotes on Friday, compared with a premium of $4.11 per barrel a day earlier..

Refining margins or cracks for 10 ppm gasoil surged to $42.21 a barrel over Dubai crude during Asian trading hours, a fresh high since May 11. The cracks were at $40.68 per barrel a day earlier, and have gained nearly 21% in the past week.

The front-month time spread for 10 ppm gasoil remained unchanged at $5.50 a barrel .

“China’s State Council will soon remove traffic restrictions on trucks that depart from low-COVID risk zones and reduce administration fees in a bid to smoothen freight transport and logistics hitches – which will translate to improving diesel demand,” Zameer Yusof, senior analyst at Refinitiv Oil Research said in a note.

The June crack for 500 ppm Gasoil is higher at $43.75 /bbl with the 10 ppm crack at $44.75 /bbl. The regrade is at -$7.90 /bbl.

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

Cash differentials for Asia’s 0.5% VLSFO climbed for a third consecutive day to reach a new record-high premium of $61.34 per tonne to Singapore quotes on Friday, with June arbitrage inflows from the West set to remain tight.

Reflecting the tight supply outlook, the front-month 0.5% VLSFO time spread also widened sharply to $61.50 per tonne at the Asia 4:30pm (Singapore time) close on Friday, striking a new record-high backwardation, Refinitiv Eikon data showed.

In contrast, Asia’s high-sulphur fuel oil (HSFO) continued to weaken amid expectations of more inflows from the Middle East and Russia into June.

Cash differentials for 380-cst HSFO flipped into discounts of 45 cents per tonne to Singapore quotes on Friday, versus premiums of $1.47 per tonne to Singapore quotes a day earlier.

Meanwhile, cash differentials for 180-cst HSFO fell to a premium of 1 cent per tonne to Singapore quotes, versus $1.27 per tonne the previous day. Declines are capped by robust seasonal 180-cst HSFO demand in the Middle East and South Asia for power generation.

The June crack for 180 cst FO is lower at – $7.50 /bbl with the visco spread at $7.85 /bbl.

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

We will hedge a tranche of the July 10 ppm gasoil crack at current rates of 41.45 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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