Weekly crack roundup: Naphtha, gasoline and fuel oil cracks rally

Quantum Commodity Intelligence - Cracks for naphtha, gasoline and fuel oil gained over the week as crude fell.

Naphtha cracks continued to rally in Asia and Europe Friday at the time of the Singapore close amid low stock levels and a light ends rally after the US inventory report, Quantum data showed Friday.

Cracks for August paper for CIF Japan were pegged at $2.36/b against Brent, up $0.60/b from the previous Friday.

That compares with below -$1.50/b in the middle of June.

Low stocks in Europe and concerns of falling supplies from the US were underpinning the rally in Asia, although the dynamic was similar in Europe, where the crack for naphtha cargoes into northwest Europe gained $0.43/b to $1.73/b on Thursday evening compared with a week earlier.

Stock figures there lent some support, falling 46,000 mt over the week to July 15 to 169,000 mt (152,000 barrels) in ARA, also the lowest this year, and down around 100,000 mt since June 10, according to sources, citing Insights Global data.

Gasoline

August cracks for Eurobob E5 gasoline in Europe rallied over fears of further refinery run cuts in the US after inventories there showed a big product build despite lower utilization rates in the world's biggest oil consuming nation.

EBOB cracks rose $0.37/b to $12.35/b by 1630 Singapore time on Thursday, while US RBOB cracks rose from $22.06/b to $22.58/b.

The August paper RBOB-EBOB spread fell by $0.45/mt to $20.45/mt, indicating a narrower arb, however.

In Singapore, cracks broadly flatlined, although they were choppy. RON 92 cracks were down $0.17/ to $8.71/b FOB Singapore, according to Quantum data.

Light end stocks in the Asian hub rose 2% in the week and now stand at a three-month high.

Jet

Jet paper cracks for August in Singapore rose $0.28/b to $2.97/b on Friday compared with a week earlier, but demand was said to be still poor with flights in southeast Asia lagging severely behind other regions as travel restrictions in the region choke demand.

The east-west spread has blown out this week to -$17/mt, meaning that it is the recovery in Europe that continues to provide support for Asian cracks.

And there was some good news earlier in the week as European flight numbers last week were up 5.6%, although ongoing outbreaks, particularly in the Iberian peninsular are a cause for concern for European demand.

Jet cracks in Europe also rose by Thursday compared with a week earlier, with August paper at $5.74/b from $5.58/b despite stock levels remaining extremely high compared to 2019 levels.

But like Asia, Europe is facing a changing demand picture.

Over the past week Germany and France advised their citizens not to travel to the region amid rising cases while in the UK, the so-called Freedom Day of 19 July – when all restrictions are meant to be removed – is becoming less certain, with the government recommending that almost all should stay in place after saying a staggering 1 in 95 people in England had Covid-19 last week.

Diesel

Singapore diesel cracks also outperformed, rising $0.50/b over the course of the week – or 10% - as distillate stocks at the hub fell.

Diesel cracks have been rising steadily over the past three weeks, although they remain $1.20/b off their high so far this year. Distillate stocks are down 16% so far this year.

August paper for monthly Low Sulfur Gasoil futures, combining August and September future contracts, was steady at around $7/b to $7.25/b throughout the week.

Diesel and gasoil stocks were little changed in ARA, gaining 19,000 mt to 2.3 million mt over the week to July 15, around its average over the last seven weeks, according to sources, citing data from Insights Global.

But distillate stocks are much lower than July 2019 levels, down more than 300,000 mt.

Fuel oil

Week on week, the biggest gain in Singapore was in marine fuel oil 0.5%.

Shrugging off a small gain in residual fuel stocks in Singapore the marine fuel 0.5% crack rose by around a third from $2.98/b on 9 July to $3.84/b FOB Singapore on a 6.9 density basis.

Competition from Zhousan has fallen in China, despite higher throughput in the country, with market sources saying Zhousan bunker fuel was trading at a $5-10/mt premiums over Singapore fuel over the past week.

Higher marine fuel in Singapore has pushed up the spread between high sulfur and 0.5% marine fuel to around $130/mt this week.

In ARA, August cracks for marine fuel (0.5% sulfur) saw similar gains, rising from $0.77/b on Monday to $1.16/b on Thursday.