Crude Oil
Oil prices fell on Friday, but Brent crude marked its sixth straight week of gains, boosted by plummeting Venezuelan production, strong global demand and looming U.S. sanctions on Iran. Brent crude futures fell 79 cents to settle at $78.51 a barrel. WTI crude futures fell 21 cents to settle at $71.28 a barrel.
Oil prices climbed above $80 a barrel on Thursday for the first time since November 2014, before retreating on a stronger dollar and lack of fresh supportive data to Wednesday’s levels. Brent rose 2 cents to settle at $ 79.30 /bbl. West Texas Intermediate crude settled flat at $ 71.49 /bbl.
The global benchmark on Thursday broke through $80 a barrel for the first time since November 2014, and investors anticipate more gains due to supply concerns, at least in the short term. Brent, which has gained about 17.5 percent since the start of the year, rose about 1.9 percent this week. WTI rose about 0.9 percent for the week, its third straight week of gains.
Hedge funds and other money managers cut their combined futures and options position in New York and London in the week to May 15 to the lowest level in six months, the U.S. Commodity Futures Trading Commission said on Friday. The move was the fourth consecutive cut. The net long position dropped by 15,322 contracts to 419,907 during the period.
The U.S. oil rig count held steady at 844 this week after rising for six weeks in a row.
This morning, crude oil prices have risen on news that the US and China have put their trade war on hold.
21 May 2018
The Wall of Worry holds
The week under review closes positive for the 6th consecutive time at 78.67/ bbl. Importantly the close is a good 2.3% off the record highs of 80.50/bbl. The is the most the closing has come off from the highs in any of the last 6 weeks. While short term momentum continues to be strong, this is the first week in 6 where short term selling has matched the buying.
The targets for this month in the 79-80 range are met with more than a week to go before expiry of the current contract.
Trading Strategy
Last week we had recommended for aggressive traders, that they go long to target $78-79 /bbl. This would have made such traders good money.
For the coming week, market action is likely to be two-way again. The sell off from the 80.50/bbl highs is likely to be retraced. It is also likely that new swings highs will not be held. We suggest traders keep positions light till we either confirm or deny a short-term top inside a larger up-move that is flagging. The wall of worry is still operational, holding down weekly highs
Supports and Resistances
$ 78.70 is a level around which the market has pivoted thrice in the last 10 days. Below that supports lie at $ 77 – 77.50 levels. Immediate Resistance at 79 /bbl. The four year high at $ 80.50 would be the next resistance.
Naphtha
Asia’s naphtha crack extended gains to end the week at a four-session high of $107.70 /mt due to recent strong demand and tighter supplies. The strong fundamentals kept spot premiums for Indian cargoes at high level with trades being reported at premiums of MOPAG + $ 25- 30 /MT.
The June crack however has sprung up to $ 0.20 / bbl
Gasoline
Asia’s gasoline crack eased by 30 cents to $9.56 a barrel on Friday. Demand has improved in Asia, with India and Indonesia seeking cargoes but supplies were still comparatively high.
The June crack is steady at $ 12.00 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s jet fuel margins stayed at firm levels of above $16 a barrel on Friday supported by demand, but rising oil prices were a concern for airlines. Jet fuel margins have so far have performed well, averaging at about $15.55 a barrel for January to May 18 this year, higher than the same period for 2015-2017.
In the meanwhile, the gasoil trading window shows signs of resuming a ‘play’ with Winson Oil buying 4 of 5 cargoes trading in the window. At 750 KB, this was the highest volume of gasoil traded since March 12.
The June crack is stronger at $ 16.05 / bbl with the 10 ppm crack quoting at $ 16.75 /bbl. The regrade has improved to $ 0.40 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The rise in bunker fuel costs has dampened shippers’ prompt bunker fuel buying interest, weighing on 380-cst ex-wharf and delivered premiums over the past two weeks. Improved supply availability has also weighed on premiums.
The June 180 cst crack has improved to -$ 3.50 / bbl. The visco spread has dropped to $ 1.60/bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The June 180 cSt-Dubai crack is still hovering around -$3.50. While we had a target in mind of better than -$ 3.25 /bbl , we may just recommend a hedge should we see improvement tomorrow.
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.