Middle Distillates Trading
Crude oil is one of the most valuable commodities on earth but is of little use in its raw state. Middle distillates are used primarily as fuel for heating, lighting and transportation globally. When crude oil is refined, middle distillates make up between 25% and 40% of the oil products yield. Given the demand and higher value of middle distillates, however, heavier distillates are often cracked to increase the overall quantity of middle distillate produced.
Redstone Commodity Search works closely with traders, refineries and utilities primarily in a front office capacity, helping to recruit relevant staff (more information about us).
Recent middle distillate mandates include:
- Middle Distillates Trader, London
- Middle Distillates Marketer, Switzerland
- Middle Distillates Operator, Moscow
- Jet Fuel Trader, Singapore
- Head of Gasoil Trading, Switzerland
- Heating Oil Broker, New York
What are Middle Distillates?
Middle distillates is the term used to describe a range of refined products, which result from the separation of crude oil through fractional distillation, between lighter products (LPG and gasoline) and heavier products (fuel oil). Physically they are clear, colourless to light yellow, flammable liquids with between ten and twenty carbon atoms; shorter carbon chains than lighter distillates but longer than residual products. They are known as middle distillates as they condensate during the refining process in the middle of the fractional distillation tank in the “middle” boiling range. They are drained from the column in side steams as two primary fractions from which sales products with defined properties are cut:
- Gasoil – heating oil (kerosene), diesel and jet fuel
- Heavy gasoil – heating oil and diesel fuel
The finished petroleum products are created through further refining processes and blending various components (hydrocarbon blend stocks ranging from butane to heavy naphtha) which could have different compositions depending on the crude oil selected.
The average yield of middle distillates is about 40% of the volume of crude oil; taking into account gasoil produced from breaking the hydrocarbon chains of residual fuels through catalytic or thermal cracking. This percentage has significantly increased over the decades in tandem with the advancement of technology.
How are Middle Distillates Traded?
Traders typically specialise in one or more oil derivatives from the same distillates group. Middle distillates trader for example could trade in a few middle distillates products such as diesel and jet fuel or across the whole middle distillate spectrum. Some traders also trade across other categories such as light end products or residual fuels.
Oil products are transported from the refinery to be blended and stored before entering the retail market and reaching final consumers.
Middle distillates products are traded extensively in financial markets. Derivatives contracts available on the Chicago Mercantile Exchange (CME), ICE (Intercontinental Exchange) and New York Mercantile Exchange (NYMEX) include:
- Heating oil – Heating Oil 1st Line Future (HOF), NY Heating Oil (Platts) Futures (YF), Gulf Coast Heating Oil (Platts) Futures (GP)
- Jet fuel – Gulf Coast Jet Fuel Futures (JCF), Jet FOB Rotterdam Barges (Platts) Future (JER), Jet Fuel Cargoes CIF NWE (Platts) BALMO Futures (F3), Jet Aviation Fuel Cargoes FOB MED (Platts) Futures (1T)
- Diesel – Diesel Crack – Gulf Coast ULSD vs WTI 1st Line Future (GUW), Diesel Diff – New York Harbour ULSD 1 Month Calendar Spread Option (HOC), European Diesel 10 ppm Barges FOB Rdam (Platts) vs. Low Sulphur Gasoil Futures (ET)
- Gasoil – LS Gasoil (G), Singapore Gasoil Future (SWS), EU-Style Low Sulphur Gasoil Option/Future (UUL), Low Sulphur Gasoil Mini Financial Futures (QA)
Who are the customers?
- Aerospace and military – jet oil for aircraft engines
- Domestic and commercial heating – kerosene
- Transportation – diesel
Light Distillates Trading
Crude oil is of little use in its raw state, it is the refined products which are most valued by the end consumer. In the distillation tower, crude oil is separated into light distillates, middle distillates, heavy distillates and residuum (read more on crude oil).
What are Light Distillates?
Light distillates is the term used to describe refined oil products which are produced following fractional distillation at the top of the distillation tower, above the middle distillates (kerosene, jet fuel, diesel) and heavier products (heavy fuel oil (FO), asphalt, bitumen, lubricating oils and waxes). Light distillates have the lowest boiling points, consist of short hydrocarbon chains, and are flammable substances which can be in either a gaseous or liquid state.
The main light distillate products are:
- Liquefied petroleum gas (LPG) – one of the most vital alternatives to gasoline, powering millions of vehicles. Ideal fuel for heating and cooking due to its high energy content and ability to burn readily in air.
- Gasoline (also known as petrol) – primarily used as fuel in internal combustion engines and the most commonly used transport fuel. It is used in cars, trucks, boats, motorbikes etc. It can also be used to power motorised equipment such as lawn mowers and chainsaws.
- Naphtha – can be used in solvents, as fuel (portable camping stoves, lanterns, cigarette lighters), and as feedstock for petrochemical production
How are Light Distillates Traded?
Physical traders generally focus on one or more oil product from within the same group. For example, a trader might specialise in gasoline trading or gasoline, naphtha and LPG trading depending on the company. Some light distillates traders may also trade in lighter middle distillate products.
Light distillate products are transported in tankers or cylinders depending on quantity and product. Gasoline is not usually transported in large quantities for safety reasons – instead, crude oil is transported to the country of use and is then refined.
Light distillates are also traded in financial markets as derivatives contracts. Examples include:
- LPG – Propane, Argus CIF ARA, Fixed Price Future (APC); Normal Butane, OPIS Conway In-Well, Fixed Price Future (IBC); Month Belvieu Iso-Butane (OPIS) Futures (81); Argus Propane Far East Index Futures (7E)
- Gasoline – RBOB Gasoline Futures (RB), Gulf Coast CBOB Gasoline A2 (Platts) vs. RBOB Gasoline BALMO Futures (GBB); NY RBOB (Argus) Gasoline Futures (NYA); Los Angeles CARBOB Gasoline (OPIS) Futures (MH); Gasoline Singapore Mogas 92 Unleaded (Platts) Future (SMT)
- Naphtha – C+F Japan Cargo Future (NJC); Naphtha FOB Med Cargoes (Platts) Future (NIT); Singapore Naphtha Future (NPT); European Naphtha Cargoes CIF NEW (Platts) Calendar Month Future (EJN)
Who are the customers?
- Vehicle owners
- Transport companies
- Petrochemical producers
- Users of motorised equipment (lawn mowers, chainsaws, compressors, electricity generators)
- Hospitality sector (mobile catering vans)
- Paper and food processing industries
- People who live/work in remote locations not connected to the mains gas