Crude Oil
Crude oil prices collapsed again notwithstanding what appeared to be bullish data from the DOE. Brent ended the day$ 1.20 lower to settle at $44.82 /bbl. WTI too lost 94 cents to settle at $42.53
The momentum with which prices dropped yesterday was startling to say the least. The market continues to be in a bear grip which seems to technically point to as low as $ 41 /bbl basis Brent. In our analysis of DOE stocks we will try to see the fundamentals which may be contributing to this sentiment other than the obvious increase in Libyan, Nigerian and US production.
DOE Data
For a change, the DOE data reported draws in both crude and gasoline as can be seen from the chart below.
Given market expectations for crude and gasoline, the data appears fairly positive, even bullish, for prices. Hence the price drop after this data appeared to be a bit perplexing. However, if we take a look at total stocks rather than just changes this week, we get a different perspective.
A quick look at the above graphs shows that stocks continue to be at their highest level for this time of the year. In short, crude and gasoline stocks should have been drawing far more sharply at this time of the year. Arguably that has been offset by a much higher refinery run rate (94% as compared to 91% at this time last year), but then that would reflect in higher crude stocks.
Therefore, all said and done, the draws do not appear as bullish at it would seem ab initio. The only bright spark in the data is a 1% year on year increase in Gasoline demand. Having said that, if we look at the 4 week average, even that number appears to be getting lost in the smoothing of data
Naphtha
The naphtha cracks continue to be supported with active trades in the physical market and falling crude prices. Kuwait Petroleum Corp (KPC) was learnt to have sold a 25,000 tonnes cargo of full-range naphtha for June 24-25 loading to Vitol at premiums in the high single-digit levels to Middle East quotes on a free-on-board (FOB) basis.
The July crack has turned positive at $0.05 /bbl
Gasoline
The Gasoline cracks have recovered slightly on the back of falling crude prices and rise in demand from India due to planned shutdown of many refinery units for maintenance and/or upgradation to meet higher specifications of gasoline and diesel. India’s Bharat Petroleum Corp Ltd (BPCL) is seeking 70,000 tonnes of gasoline for August arrival at Kochi and another optional 35,000 tonnes of the fuel for September arrival at Kochi.
The July crack is slightly higher at $ 9.80 /bbl
Distillates
Distillate market has weakened as physical term cargoes were heard to have been traded at softer premiums. Bangladesh Petroleum Corp (BPC) has sealed a contract to buy gasoil for July to December delivery at $2.20 a barrel over Middle East quotes, down from $2.30 a barrel for first-half 2017 delivery. India’s BPCL has also fixed its term premium for jet fuel for second-half 2017 delivery at $2.80 per barrel to Middle East quotes versus $3 a barrel for January-June delivery
The July crack is down at $ 10.90 /bbl with the July regrade better at -$ 0.25/bbl
Fuel Oil
The Fuel Oil cracks continue to get stronger on the back of robust demand for power generation during the summer months. However, some traders are now growing cautious of the prevailing high margins anticipating that new supply will begin flowing to the East from Europe and South America, driving margins back towards their typical levels.
The The July crack is much stronger at $0.65 /bbl with the visco spread at -$1.05/bbl
About this blog
This blog post attempts to give a top level summary of the Singapore market goings on to a person who seeks to obtain a directional sense of the market on a daily basis.