The Singapore cracking margin against Dubai crude fell for the second straight trading session to $6.23/b Wednesday, its lowest in more than three weeks, undermined by softer light distillate cracks, Platts data showed Thursday.
The last time the spread was lower was January 4, at $5.99/b.
However the Singapore cracking margin in January to date, at $7.19/b, is still 43% higher than the average over full-year 2015 of $5.02/b.
The front-month naphtha/Dubai crack swap has fallen sharply this week, dropping $3.09/b from Monday’s close to $3.98/b Wednesday, the lowest the spread has been since November 11, 2015, then it stood at $3.77/b.
The sudden change in naphtha sentiment was brought about by a weaker demand outlook in the region due to naphtha steam cracker outages, while naphtha supplies in the region remained abundant.
The CFR Japan naphtha versus March ICE Brent futures or the cash crack fell $5.875/mt day on day to $66.10/mt Wednesday, the lowest since September 9, 2015, when the CFR Japan naphtha crack versus month one ICE Brent hit $64.575/mt.
The weaker Asian gasoline crack — the spread between front-month 92 RON gasoline swaps and front-month Dubai crude swaps — added to the slide in refining margins.
The spread fell $1.39/b day on day to $17.78/b Wednesday, the lowest since December 20, 2015, when it stood at $17.18/b.
However, the gasoline crack spread has averaged $20.13/b in January to date, up from $17.73/b over the same period of December.
The softer sentiment was led by weaker NYMEX RBOB futures, sources said.
The Asian benchmark Mean of Platts Singapore 92 RON gasoline crack to front-month ICE Brent futures fell to an average of $14.62/b this week from an average of $15.66/b last week, while the NYMEX RBOB crack at Asian close fell to $12.74/b from $14.49/b over the same period.
Colder temperatures in the US this month could curtail gasoline demand further, even as prices fall close to $1/gallon.
Gasoline stocks in the US rose 3.464 million barrels to 248.461 million barrels last week, above analysts’ expectations of a 1 million-barrel build, data released this week by the Energy Information Administration showed.
Implied demand slipped 138,000 b/d to 8.941 million b/d, 1% below the year-ago level.
The decline in cracks comes despite a slightly weaker Dubai crude market in January than in December following a sharp decline in outright global crude prices.
The front-month cash Dubai spread to same-month Dubai swaps has averaged minus $1.89/b to date in January, compared with minus $1.66/b in December.
Dubai-linked crude grades have seen strong buying interest from Asian refiners this month because of benchmark Dubai’s discount to Brent.
The second-month Brent/Dubai Exchange of Futures for Swaps or EFS has averaged $3.26/b in January to date, compared with $3.25/b in December.
The recent strength in fuel oil cracks has buoyed Asian refiners’ buying interest in medium and heavy sour crudes from the Middle East, pushing up premiums of grades including Upper Zakum, Oman, Qatar Marine and Banaco Arab Medium.
Platts margin data reflects the difference between a crude’s netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.