Crude Oil
Oil prices rose on Wednesday despite data showing rising U.S. inventories, holding within sight of three-year highs reached the previous day on geopolitical tensions including the prospect of fresh sanctions on Iran.. Brent crude oil futures settled 14 cents higher to settle at $74.00 /bbl, while U.S. crude futures gained 35cents to settle at $ 68.05 /bbl.
French President Emmanuel Macron forcefully challenged many of the U.S. president’s policies during a visit to Washington, saying an international nuclear deal with Iran, which President Donald Trump has harshly criticized, was not perfect but must remain in place until a replacement is forged. Trump will decide by May 12 whether to restore U.S. sanctions on Tehran, which could be a first step to ending the deal. The market was also supported by concerns around oil output from Venezuela.
Late last evening, President Macron told reporters he thinks the US will back out from the Iran nuclear deal for domestic reasons. This has pushed crude higher this morning in Asia.
But the rise in U.S. Treasury yields above 3 percent has driven the dollar to three-month highs, making oil more expensive for buyers using other currencies. This might eventually pressure crude prices, even though oil and the dollar have moved in tandem for a few weeks.
EIA reported a build of 2.2 million barrels in crude stocks. This was contrary to market expectations of a draw of 2.6 million barrels..
The build in stocks can be largely attributed to run cuts as increase in imports was exceeded by the increase in exports. Refinery runs dropped further to 90.8%. Crude Exports were at a record high or 2.33 million barrels per day.
Gasoline stocks also built as demand for Gasoline fell by 774 kbpd to 9.1 mbpd. Refinery runs dropped further to 90.8%.
Distillate stocks fell due to an increase in exports of 439 kbpd coupled with a drop in production of 162 kb/d. The draw may have been a lot more had not the demand for stocks dropped by 607 kbpd. (See below)
For detailed charts on crude and product stocks, please visit our US Department of Energy Data page
Naphtha
Asia’s naphtha crack rose for the fourth straight session on Wednesday to $78.40 a tonne, the highest since April 13, as recent demand for June cargoes gave the market support.
The May crack has has now recovered to -$ 1.10 /bbl
Gasoline
Asia’s gasoline crack, in contrast, fell to $6.27 a barrel, erasing gains from the previous three sessions and was now at its lowest since April 20. China is now expected to issue fuel export quotas for the rest of this year in one allocation round rather than in batches. It will be keeping the total allowances for 2018 unchanged from last year’s level at 43 million tonnes.
Light distillates stocks held in Fujairah rose for the second week to 8.224 million barrels in the week to April 23, making this the highest level since Feb. 26,
The May gasoline crack is steady at $ 10.45 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s jet fuel cash premiums rose on Wednesday to the highest in nearly three weeks as seasonal refinery turnarounds in the region kept a lid on supplies. Cash differentials for jet fuel rose to $1.17 a barrel to Singapore quotes, compared with $1.09 on Tuesday. Jet fuel cracks will stay strong going into the third quarter but considering a lot of refineries shut for maintenance will start coming back on stream after the second quarter, the premium levels may get a little softer. Asia’s jet fuel margins or cracks have averaged above $15 per barrel over Dubai crude so far this year, as against an average of $12.36 a barrel in 2017. The physical jet fuel market as per the Singapore window remained muted with no trades or offers on Wednesday.
Meanwhile, cash differentials for gasoil with 10 ppm sulphur content dipped to 48 cents a barrel to Singapore quotes from Tuesday’s 55 cents, the highest so far this year. People are anticipating the middle distillates would continue to remain relatively stronger than other refined products for the entire year.
Middle distillates inventories in the Fujairah Oil Industry Zone (FOIZ) fell 17.5 percent from a week earlier to 1.7 million barrels in the week ended April 23.
The May gasoil crack has strengthened to $ 15.20 /bbl with the 10 ppm crack at $ 15.80 /bbl. The regrade is at $ 1.00 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Concerns about narrowing supplies of finished grade fuel oil in Singapore helped boost the front-month arbitrage spread on Wednesday. The May East-West arbitrage spread rose to about $14.75 a tonne on Wednesday, up from about $14.50 in the previous session and $13.50 on Friday. The Singapore fuel oil market has rallied this week as inventories have dropped at the same time that some supplies in the region do not meet the standards for use as shipping fuel, further reducing availability. The supply tightness stems from too much of the supply of bunker fuel being so-called off-specification, meaning it does not meet standards for use on ships.
The May 180 cst crack has jumped to -$ 6.35/ bbl. with the visco spread narrowing to $ 1.55 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
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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.