Oil markets volatile amid Suez, demand concerns, cracks fall back
Dubai, UAE (Quantum Commodity Intelligence) - Benchmark Middle East crude oil ended higher Thursday from the previous-day's Singapore settlement, but markets remain volatile on demand concerns and uncertainty over the timetable for freeing the stranded container ship currently blocking the Suez canal.
Oil prices had rallied strongly on Wednesday as it became clear the Ever Given vessel would likely cause prolonged delays to both crude and refined products navigating via the narrow waterway.
However, traders continued to focus on demand-recovery concerns, particularly amid European lockdowns.
Dubai cash for May delivery was assessed at $62.40/b on March 25 (16.30 Singapore time), up $1.45/b from Wednesday's Singapore close, while DME Oman futures for May were $1.11/b higher at $62.21/b.
But oil prices went into reverse after the Asian-market close, with energy disruption expected to be mitigated as tankers seek alternative routes.
"At least one U.S. (cargo) export of LNG appears to have been rerouted in the North Atlantic toward South Africa's Cape of Good Hope, away from its previous heading toward Suez,' consulting firm Wood Mackenzie said in a note to clients Thursday.
Talk is that the daily cost of the grounding is between $10-15 million per day for the Suez Canal Authority, with 19,000 ships passing through the artery each year at a cost of about $700,000 per vessel.
Insurance market sources said the authority would likely seek loss of revenue from the vessel owner.
Products
In refined products, gains in the crack made on Wednesday were reversed on Thursday as the market digested more news about the Suez grounding.
The exception to that was gasoline where front month cracks rose for the third straight day after EIA data showed stronger road fuel demand. 92 RON April FOB Singapore swaps rose $2/bl and the crack firmed $0.33 to $6.06/b. One physical deal for 50,000 bls was heard at $71.80 FOB Straights for mid-April loading.
For naphtha, April swaps rose $11/mt to $564/mt, although the crack fell back from Wednesday to negative territory at -$0.22/bl. No physical deals were heard.
The 10ppm crack fell back slightly as the move up in April swaps lagged front month Brent cash, with the front month crack at $3.63/b, down $0.25 c/b on the day. No physical deals were heard and the discount to the underlying swaps and the premium to 0.25% and 500ppm was unchanged.
After doubling to almost $1.60/b on Wednesday, the Jet Kero April crack fell back Thursday with to $1.04/bl versus Brent cash. Cash was still marked at a $0.50/b discount to the underlying swaps, leaving physical barrels trailing crude.
Residual fuel cracks fell back, with April swaps climbing $6-8/b for the 180cst, 380cst and 0.5% marine fuels when to keep track of the crude rally they should have moved $10-11/mt higher. One deal was heard for 180cst at a $1.00 premium to the underlying swaps.