Since 2020, crude oil has plummeted due to OPEC’s increase in production and the spread of the pneumonia epidemic. During the decline of crude oil, various oil products have performed differently. The obvious decline was in the light oil series: gasoline, propane (LPG), and naphtha. The medium and heavy series are relatively resilient: diesel, 0.5% fuel oil, kerosene, 3.5% fuel oil. It is difficult to measure the strength of each product relative to crude oil through changes in absolute prices. It is more intuitive to look at the cracked price difference. The cracked price difference of 0.5% fuel oil is the strongest, followed by kerosene, diesel and 3.5% fuel oil. The worst is gasoline, Naphtha, propane, and gasoline crack spreads have seen the most significant decline recently.
It can be found in this round of plunge in crude oil Heavy oil (asphalt, fuel oil) has relatively benefited, while light oil (LPG, naphtha, gasoline) has relatively bleak. During the crude oil crash, the heavy oil cracking spread (calculated in US dollars/barrel) is likely to strengthen. On the one hand, heavy oil has a high density and a small ton-to-barrel ratio. Those with a smaller ton-to-barrel ratio will suffer less value loss at the same drop, so the cracking spread will naturally become relatively stronger. For example, if the ton-barrel ratio of 380 fuel oil is 6.35, its cracking spread = 380 price/6.35-crude oil; if the gasoline ton-barrel ratio is 8.3, its cracking spread = gasoline price/8.3-crude oil, the cracking spread of 380 fuel oil will lose less at the same drop. . This rule can partially explain the fact that heavy oil cracking spreads are more resilient than light oil during the crude oil plunge.
Judging from the historical chart, the 380 cracking spread has a negative correlation with the absolute price of crude oil. This rule is obtained during the recent crude oil plunge. It confirms that the above rules are difficult to explain why there is a negative correlation. However, through the cracking spread distribution of each product, it can be roughly concluded that some cracking spreads of refinery finished products are positive and some are negative. In the past, light oil (gasoline, naphtha, LPG ) The cracking spread has always been positive, while heavy oil (3.5% fuel oil) has always been negative. The aggregated cracking spread and stability fluctuate within a certain range. There is a “you are strong and I am weak” characteristic between light and heavy oil. The crack spreads of gasoline, LPG and naphtha have plummeted recently, and this pattern has also driven the crack spread of 3.5% fuel oil to strengthen. (For details, please search for the article “Pao Ding’s Cracked Oil – The Impact of the New Crown Epidemic on Cracked Spreads”)
Both the above two points can partially explain why this round of crude oil plummeted asphalt and fuel oil was relatively resilient. , but factors supporting the cracking spread of heavy oil can also be found in fundamentals. Heavy oil supply decline expected. In recent years, refinery raw materials have been increasingly lightened. According to Reuters, Saudi Arabia’s increase in crude oil production mainly involves light oil, and the increase in medium and heavy oil production is limited. In addition, U.S. crude oil exports continue to rise, and U.S. sanctions on Iran and Venezuela continue. , the market’s expectations for light oil to be heavy and low in oil are increasing. The lightening of raw materials has led to a continuous decline in the production rate of heavy oil. The expectation of further decline in global fuel oil has been strengthened. The increase in Russian crude oil production may offset part of this expectation.
As for asphalt, the United States issued sanctions on two subsidiaries of Rosneft from February to March. The sanctions came into effect on May 20. The sanctions have already affected the purchase of Venezuelan crude oil on the market. countries are deterrent. OPEC data shows that Venezuela-China crude oil exports have dropped to 0 in February. The superimposed epidemic may have a certain impact on Venezuelan crude oil shipments. Domestic arrivals in ports from April to May are likely to decline month-on-month (Malaysia is expected to have some initial sources. Venezuelan crude oil is imported into the country, but buyers are more cautious).
On March 23, “Wuai Shipping Network” forwarded a message to the local agent in Malaysia: All ships flying the flags of countries with severe epidemics may arrive in Malaysian waters 14 days ago. Any ship entering any port in the above-mentioned countries is prohibited from entering any port in Malaysia. If there are ports in the above-mentioned countries and other countries, it must have at least 14 days of sailing time before arriving at any port in Malaysia. This news has not been officially confirmed. The epidemic has made it difficult for countries to strengthen the control of shipping. It may cause a delay in the final domestic arrival at the port, or it may have an impact on species that are highly dependent on domestic imports via Malaysia (Strait of Malacca). The species involved Or crude oil, fuel oil and asphalt. Most of the crude oil imported into my country from the Middle East needs to pass through the Strait of Malacca; in 2019, more than 30% of my country’s No. 5-7 fuel oil imports came from Malaysia; after the United States sanctioned Venezuela and Rosneft’s subsidiaries, most of the domestic Maritime crude oil arriving at the port came from Malaysia. , the epidemic has a greater impact on the short-term supply expectations of varieties with high import dependence.
After the price of crude oil plummeted, the market demand for oil storage increased significantly, and VLCC freight rates continued to soar, driving the freight rates of tankers to rise sharply, and the import costs of varieties with high import dependence. There is a high probability that it will move upward. For fuel oil, which is highly dependent on East-West arbitrage, the sharp rise in freight rates has eroded theIf there is room for arbitrage in the West, supply in the Asia-Pacific region may be lower than expected.
For heavy oil, expectations of tightening on the supply side continue to strengthen. After the epidemic caused demand to bottom out, poor demand led to The base is low, but once it returns to the normal range, the month-on-month growth will be considerable. Affected by the epidemic and various problems, iron ore shipments from Australia and Brazil in February were at a five-year historical low for the same period, and fuel sales were poor. However, iron ore shipments increased significantly in March, which is expected to drive fuel oil demand growth; asphalt February Real demand fell by 40% month-on-month and 27% year-on-year. Asphalt demand has maintained positive growth year-on-year in recent years, which means that the demand for asphalt from February to March was “smashed” by the epidemic. The low base may lead to high demand in the future. increase.
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