Crude Oil
Oil prices ended the day marginally lower as the markets still look for clearer signs of direction. Brent futures fell 35 cents to settle at $ 77.12 /bbl while U.S. crude futures eased 66 cents to settle at $ 70.70 /bbl.
Brent crude futures, closed the week up 2.8% . WTI crude futures ended the week up roughly 1.4%, for the fourth positive week in five..
U.S. drillers added 10 oil rigs in the week to May 11, bringing the total count to 844, the highest number since March 2015. This is the sixth consecutive weekly increase in the rig count.
The impact of the sanctions against Iran seems difficult to assess given statements being made by various entities. John Bolton, US National Security advisor cautioned “European companies risk being hit by US sanctions if they defy Donald Trump’s calls for commercial links with Iran”. In a call with Iranian President, Hasan Rouhani, the UK PM, Theresa May reiterated UK and Europe’s commitment to the deal. French foreign minister, Bruno Le Maire, said “We have to work among ourselves in Europe to defend our European economic sovereignty,” adding that Europe could use the same instruments as the US to defend its interests. Speaking on Europe 1 he added: “Do we want to be a vassal that obeys and jumps to attention?”
14 May 2018
The Wall of worry
At a close of 76.99/ bbl, we have the 5th consecutive week of positive closes. The high low range made last week is at 77.97/bbl and 73.14/bbl respectively, the highest since this move starts at ~67/bbl 5 weeks ago.
We are at a situation where, despite trading at historic levels, the larger move looks exhausted while short-term strenght continues to come in. Momentum however continues to fail this move and other short term indicators are stretched. Therefore, while we are continuing to look for a top, we believe short term bullishness will continue to keep things buoyant.
Trading Strategy
Last week we had recommended (for the bold) a small short position at this level with a stop above $ 78.00 targeting $ 71.00 – 71.50. We are yet to be stopped out of this position. However, given the price action, we would exiting this position and waiting. For aggressive traders, we would suggest adding to length to target $78-79 /bbl
Directionally we wait for reversal signals to come with a close below 75. Till then we expect markets to keep climbing the wall of worry (the RED supply line holding holding the rise since April’18,
Supports and Resistances
Immediate Supports are around 74.50-75.50/bbl. Immediate Resistance at 78-79 /bbl.
Naphtha
Asia’s naphtha fundamentals were strong as tight supplies against firm demand lifted Indian spot premiums to levels not seen since 2015.
The crack for balance May has jumped up to $ 0.40 / bbl. The June crack is still at $ 0.10 / bbl
Gasoline
Asia’s gasoline crack ended the week at a one-month high of $7.32 a barrel, lifted by a sharper-than-expected drawdown in key market U.S. inventories last week.
Stocks in ARA, dropped by 41 KT to 1043 KT. While stocks have fallen within the 5 year band, they are just marginally higher than last year’s levels at this time of the year.
The balance May crack has further improved to $ 10.95 / bbl. The June crack is at $ 11.35 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for 10ppm gasoil rose on Friday, buoyed by firmer demand, while cash premiums for jet fuel gained, ending three consecutive sessions of losses.
Cash premiums for gasoil with 10 ppm sulphur content climbed to 50 cents a barrel to Singapore quotes, up from 46 cents a barrel on Thursday. Meanwhile, cash premiums for jet fuel rose to 37 cents a barrel to Singapore quotes, compared with 34 cents a barrel on Thursday, the lowest in about six weeks.
Gasoil inventories in ARA continued to drop. This week the reduction in stocks was 99 KT taking stocks to just under 2 million tons. This is the lowest level since May 2014 and around 38% lower than 2017 levels
The balance May crack climbed to $ 15.65 / bbl with the 10 ppm crack quoting at $ 16.20/bbl. The regrade is lower at $ 0.25 /bbl
The June crack has also increased to $ 15.60 / bbl with the 10 ppm crack quoting at $ 16.30 /bbl. The regrade is lowerer at $ 0.60 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s June fuel oil viscosity spread rose 75 cents from the previous session to end the week at a three-session high of $9.75 a tonne, reflecting a firmer market due to a shortage of blending components..
Fuel Oil inventories in the ARA region rose by 133 KT to 1.15 million tons. This is closest to the highest level of stocks in the last 6 years for this time of the year.
The May 180 cst crack has improved to -$ 4.90 / bbl. The visco spread has come in to $ 1.35/bbl.
The June 180 cst crack is at -$ 4.60 / bbl. The visco spread is at $ 1.40/bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh comments here.
Hedge recommendations are essentially made for refiners. These are not trading positions as such. The rationale of these positions is to lock in extraordinary levels for the refiner.
Click Here to see how all our recommendations have fared
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.