Crude Oil
Oil rose on Monday, hitting three-week highs, supported by strong U.S. demand and comments from Saudi Arabia that it would continue to curb production in line with OPEC-led efforts. Brent futures gained 19 cents to settle at $ 67.51 /bbl. WTI also gained 36cents to settle at $ 63.91/bbl.
Saudi Energy Minister, Khalid al-Falih, said on Saturday the country’s January-March crude production would be well below output caps, with exports averaging less than 7 million barrels per day . He said Saudi Arabia hoped OPEC and its allies would be able to relax production cuts next year and create a permanent framework to stabilize oil markets after the current agreement on supply cuts ends this year.
Libya’s National Oil Corp said on Saturday it had declared force majeure on the 70,000-bpd El Feel oilfield after a protest by guards closed the field.
Naphtha
Asia’s naphtha crack rose to a five-session high of $70.68 a tonne on Monday as recent demand from North Asia could have given the market some support. Over in China, customs data showed that the country imported around 365,000 tonnes of naphtha in January, making this its lowest monthly import since October 2016,
The March crack has moved into positive territory today and is valued at $ 0.10 /bbl
Gasoline
Asia’s gasoline crack recovered mildly to close at $7.44 a barrel. This was 28 cents higher than Friday’s close.
The March 92 Ron gasoline crack has moved still higher today to $ 11.35 /bbl
Distillates
Asia’s jet fuel cash premium to Singapore benchmark prices on rose above $2 a barrel on Monday, its highest since Reuters starting tracking the value in 1998, on tight supplies.
Robust demand for air travel for 2018 and Asian refinery maintenance support the market even as the cold snaps were to end soon in Japan, which uses kerosene for heating purposes. More than 4.3 billion passengers were expected to travel by air globally in 2018, an increase of about 5.6 percent compared to 2017. Fuel consumption by the airlines industry was expected to grow to 92 billion gallons (2.2 billion barrels) in 2018, which compared to 88 billion gallons in 2017.
In the Platts Trading Window, jet fuel deals resumed after a gap of nearly two weeks with deals being struck at high premiums.
The March paper gasoil crack has increased to $ 14.55 /bbl. The 10 ppm crack is at $ 15.60 /bbl. The March regrade has gone still higher at $ 2.85 /bbl today.
We would further add positions in Jet – Dubai crack for March, 2Q2018, 3Q2018, 4Q2018 at $ 18.10 /bbl, $16.30/bbl, $ 15.90 / bbl, $ 16.30 / bbl. An aggressive hedge for the Jet Dubai crack for calendar 2019 at $ 17.50 / bbl is also recommended. Likewise we would recommend a hedge for gasoil in calendar 2019 at $ 16.10 /bbl
Hedge Recommendations with current values in Red
March Regrade $ 1.40 ($ 2.85)
March Regrade $ 2.00 ($ 2.85)
March Regrade $ 2.85 ($ 2.85)
April Regrade $ 1.60 ($ 1.80)
2Q2018 Regrade $ 1.25 ($ 1.45)
4Q2018 Regrade $ 1.30 ($ 1.45)
Here it is important to recognize two things. Our recommendations are hedging positions and not trading positions. While the March hedges would come off the radar on March 1, ostensibly out of money, we need to see how they settle out. Secondly, even if they do settle out of money, we have secured an extremely rarely seen margin for our regrade (at an average of $ 2.075 /bbl). In the last 5 years, the regrade has settled above $ 2/bbl only three times. Therefore history would tend to be on our side.
Fuel Oil
Ex-wharf premiums of Singapore 380-cst high-sulphur fuel oil have remained under pressure in February amid seasonally sluggish demand for bunker fuels and competitive offers as some suppliers sought to clear their stocks to make room for incoming cargoes.
Meanwhile, the absence of buying interest weighed on the March 380-cst fuel oil crack, widening their discount to Brent crude to about minus $11.30 a barrel, down from Minus $11 a barrel in the previous session.
The March 180 cst crack is slightly lower at -$ 5.25 /bbl. The visco spread is has further increased to $ 1.15 / 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.