Global Energy Weekly.Summary: Residual fuel cracks have strengthened a lot since 3Q08... Residual fuel cracks have strengthened a lot since 3Q08...NYH NYH New York Harbor NYH New York Hospital NYH New York Herald NYH New Yorker Hotel (New York, NY) NYH New York Highlanders (baseball team, 1903 - 1912) 1% residual fuel oil cracks narrowed from the widest level ever of -$40/bbl in July last year to -$1/bbl in February, the strongest spreads in 5 years. Since then, NYH 1% residual fuel oil cracks have traded relatively firm at around -$7/bbl in spite of the rebound in flat residual fuel prices. Just like crack spreads Crack Spread The spread created when purchasing oil futures and offsetting the position by selling gasoline and heating oil futures. Notes: As the two futures contracts within the spread are relatively similar, risk is hedged against. , price differentials between residual fuels with 1% and 3% sulphur content have narrowed tremendously during the past year and have yet to widen. Why is the heaviest, more polluting pol·lute tr.v. pol·lut·ed, pol·lut·ing, pol·lutes 1. To make unfit for or harmful to living things, especially by the addition of waste matter. See Synonyms at contaminate. 2. portion of the barrel not trading at a steeper discount to other hydrocarbons in this dire economic environment? ...due to heavy crude output cuts & more refining capacityThe reduction in OPEC OPEC: see Organization of Petroleum Exporting Countries. OPEC in full Organization of the Petroleum Exporting Countries Multinational organization established in 1960 to coordinate the petroleum production and export policies of its output earlier this year partly contributed to clean up excess heavy crude in the market, resulting in narrower Brent-Dubai crude oil spreads. In addition, new upgrading capacity this year has improved the ability of refiners to process heavier grades. Still, the sharp drop in demand experienced in recent months has been playing against stronger cracks and stocks now sit at very high levels in the US, Europe and Asia. As the economy picks up, we see wider light-heavy spreadsAs we explained in a recent piece (see GEW GEW Gewerkschaft, Erziehung und Wissenschaft (German: Teachers' Trade Union) GEW Gram Equivalent Weight Distilate cracks on a recovery path), the rebound in economic activity in the months ahead should support a big uptick Uptick A transaction occurring at price above its previous transaction. In order for an uptick to occur, a transaction price must be followed by an increased transaction price. in demand for middle distillates. In turn, we believe that rising middle distillate dis·til·late n. A liquid condensed from vapor in distillation. distillate a product of distillation. crack spreads could add downward pressure on residual fuel oil cracks as we enter 2010, resulting in wider light-heavy spreads and wider sulphur and viscosity differentials among residual fuels. However, a lighter global crude blend-which is mainly the result of lower overall OPEC output and new Saudi light and medium crude oil productive capacity-could limit downside risks to residual fuel cracks. 2009 Al Bawaba (www.albawaba.com) 2009 Al Bawaba (Albawaba.com) Provided by Syndigate.info an Albawaba.com company |
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