Crude Oil
Oil prices gained on Monday, with U.S. crude ending a choppy session higher on expectations for a Canadian production outage lasting until September, while global benchmark Brent gained on looming sanctions on Iran and falling output in Libya. U.S. light crude futures gained 5 cents to settle at $73.85 a barrel. Brent jumped 96 cents to $78.07 / bbl.
The scenario on Iran is getting murkier, or clearer depending on how one looks at it. China appears to be the only firm buyer of Iranian oil going into the future. Germany, while reiterating its commitment to the deal, has said that corporates are free to decide how they wish to handle the situation. And the corporates want to do business with the US. Korea has decided to stop import of oil from Iran till it gets waivers for sanctions from the US. All in all, the scenario appears pretty bleak for Iran.
Naphtha
Asia’s naphtha crack hit a five-week high of $88.60 a tonne on Monday driven by demand. Taiwan’s Formosa, Asia’s top naphtha importer, was back in the market to buy more for August after recently buying some 200,000 tonnes of open-specification grade for next month arrival at Mailiao.
The July crack has improved to -$ 1.00 / bbl. The August crack is at -$0.85 /bbl
Gasoline
Asia’s gasoline crack rose to a two-week high of $4.58 a barrel after languishing below $4 for five straight sessions between June 29 and July 5. Part of this can possibly be attributed to strength in naphtha.
The July crack has further improved to $ 8.00 / bbl. The August crack is at $ 8.65 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s front-month jet fuel crack to Dubai crude was steady on Monday holding near a more than one-month high reached at the end of last week. However, ample spot supplies could limit the near-term upside potential for the jet fuel market. Jet cracks for August settled at $15.14 a barrel over Dubai crude in Asian trade, down just 1 cent a barrel from the previous session. The jet fuel cash premium climbed to its highest since May 31 on Monday at a premium of 11 cents a barrel to Singapore quotes.
The July crack is lower at $ 13.05 / bbl with the 10 ppm crack at $ 13.95 /bbl. The regrade is higher at $ 1.60 /bbl.
The August crack is at $ 13.60 / bbl with the 10 ppm crack at $ 14.50 /bbl. The regrade is at $ 1.35 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s prompt-month viscosity spread, the price differential between the prompt-month swaps for 180-cst and 380-cst fuel oil grades, slipped to a near four-month low on Monday. Relatively strong 380-cst fuel oil prices contributed to the weaker viscosity spread amid supply shortages and firm demand for the higher viscosity fuel. The balance-of-July viscosity spread was trading at around $7 a tonne on Monday, down 50 cents a tonne from the previous session and its lowest since March 8.
The July crack is steady at -$ 1.80/ bbl with the visco spread down to $ 1.00 /bbl
The August crack is at -$ 2.20/ bbl with the visco spread at $ 1.20 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
We were watching the August regrade yesterday. Given that it has further improved to $ 1.35 / bbl. today, we shall institute an hedge. At this stage, given the strength in the market, there is a significant possibility that the hedge may lose money. However, the point is that this is insurance in case it retraces.
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.