Feedstocks firm, visco undervalued?
‘- Sing cash diffs continue to trend down W-o-W with 0.5 at just above +20 while 380 and 180 were last assessed around +16 and +25 respectively, On the other side of the world, some VGO heard trading around +$22-23/bbl to ICE in NWE and some $24-25/bbl in the USG.
– Gasoil continues to be extremely strong relative to the resid complex. At current levels of FOGO, our breakeven calculations show at least a $40/bbl gap before diesel can break even into 380 blending
– As we argued before, that suggests any gasoil-range molecules will continue to be pulled into the diesel and jet pools, leaving very little for both LSFO and HSFO blend pools.
– With FCC/RFCC run rates reduced everywhere, there will also be less bottom-of-barrel volumes available to help cut viscosity (or sulphur) down.
– That arguably suggests that visco at $5-6/MT is undervalued. Having said that, the biggest source of the demand for actual viscosity is from AG and South Asia power burn and with a double blockade in place, dynamics within the AG are disconnecting from the rest of the region. And with alarms sounding everywhere on jet and diesel shortages, visco is perhaps the least of anyone’s worries at the moment.
– At current cash diffs, blending margins for both 0.5 and 380 have started to look quite unattractive again in Singapore. Ex-wharf bunker diffs have come off and suppliers seem to be getting fewer enquiries though that should also be looked at in the context of a big rush from owners to buy what they could in the weeks immediately following the start of the war. Demand naturally tapers after the initial demand rush is satisfied, until the next buying cycle kicks in – when there will arguably be even less resid around.
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