Crude Oil
Oil prices dropped 2 percent on Wednesday as U.S. equity markets broadly fell. Brent crude futures fell $1.91 to settle at $83.09 a barrel. WTI crude futures fell $1.79 to settle at $73.17 a barrel.
On Tuesday, the IMF cut its global economic growth forecasts for 2018 and 2019, raising concerns that demand for oil may also slump. Risks to the global financial system have risen over the past six months and could increase sharply if pressures in emerging markets escalate or global trade relations deteriorate further, the International Monetary Fund (IMF) said.
Oil prices fell as U.S. stock markets skidded on Wednesday, with the S&P500 stock index marking its biggest one-day fall since February.
This was despite worries about supply as Hurricane Michael made landfall in Florida. In the U.S. Gulf of Mexico,producers have cut daily oil production by roughly 42 percent due to the storm, the Bureau of Safety and Environmental Enforcement said. The cuts represent 718,877 barrels per day of oil production. However, latest reports suggest that Hurricane Michael’s intensity has weakened to that of a ‘tropical storm’.
Iran’s crude exports fell further in early October as buyers sought alternatives ahead of U.S. sanctions that take effect on Nov. 4.
API Data
The API has reported a massive build of close to 10 million barrels of crude stocks catching the whole market by surprise. Stocks in Cushing too have been reported to have built by the most since March 2018. Gasoline stocks have also built substantially more than expected. The only supportive data is the draw in distillate stocks.
Naphtha
Asia’s naphtha crack extended losses for the third straight session, falling this time by nearly 10 percent to $79.28 a tonne, lowest since July 2 as high supplies weighed. This move attracted buyers, with South Korea’s YNCC snapping up two naphtha cargoes at a discount deeper than $4 but narrower than $5 a tonne to Japan quotes on a cost-and-freight (C&F) basis.
Supplies from the West including Europe arriving in November were seen high. Adding to this were spot supplies from Qatar, which usually sells most of its fuel through term deals.
The balance October crack has recovered marginally to -$ 3.25 /bbl.
The November crack is at – $ 2.40 / bbl
Gasoline
Gasoline continues to be weighed down by an excess of supply. Stocks in Fujairah rose to 7.6 million barrels, a 3 month high. Stocks in the US are also at seasonal highs.
The balance October crack is now at $ 6.75 / bbl.
The November crack is at $ 6.10 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for gasoil with 10ppm sulphur content rose to 67 cents a barrel to Singapore quotes, buoyed by stronger buying interests. The premiums were at 65 cents a barrel on Tuesday.
Asia’s cash discounts for jet fuel narrowed for the fifth straight session on Wednesday to 9 cents a barrel to Singapore quotes, their lowest in more than two weeks on expectations for growing appetite for the middle distillate widely used in heating before the winter months. The prompt month time spread flipped into a backwardated structure of 2 cents a barrel on Wednesday, after staying in a contango for about seven weeks.
Middle distillates inventories in Fujairah rose 12.2 percent from a week ago to 4.34 million barrels in the week ended Monday. Compared with year-ago levels, weekly Fujairah middle distillate inventories were about 47 percent higher.
The balance October crack has jumped to $ 16.40 /bbl with the 10 ppm crack at $ 17.20 /bbl. The regrade is lower at -$ 0.85 /bbl.
The November crack is at $ 16.40 /bbl with the 10 ppm crack at $ 17.20 /bbl. The regrade is lower at $ 0.25 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Rising crude oil prices weighed on the front-month 380-cst barge fuel oil crack on Wednesday, widening its discount to Brent crude further from a near two-month high at the start of the week. The crack discount was trading at about minus $9.83 a barrel to Brent crude on Wednesday, down from minus $9.76 a barrel in the previous session and a near two-month high of $9.72 a barrel on Monday.
Total fuel oil flows into East Asia for October are estimated to be around 5.4-5.5 million tonnes, similar to the volumes seen in June and July and among the lowest for the year. The lower arbitrage volumes in October were attributed to estimates of a near 1 million tonne decline in Western volumes to Asia, while Mideast and Asia supplies remain at year average levels.
For November, however, Western arbitrage arrivals to Asia are expected to pick up with about 2.7 million tonnes assessed so far, up from about 2 million tonnes in October, Refinitiv data showed. Maersk Oil Trading has leased oil storage space in Singapore, signalling a push by one of the world’s biggest ship fuel buyers into the Asian bunkering hub ahead of changes to global fuel standards from 2020.
Fuel oil inventories at Fujairah edged 38 KB lower to 7.934 million barrels. Fujairah fuel oil inventories are now 7 percent lower from the same time last year, the narrowest year-on-year deficit in ten weeks.
The October 180 cst crack has improved to -$ 1.80 / bbl with the visco spread at $ 0.80 /bbl
The November 180 cst crack has improved to -$ 1.80 / bbl with the visco spread at $ 1.10 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The Naphtha-Dubai crack for November has improved marginally. We are still a bit wary about hedging it for now. If it comes down below – $2.50, we shall buy the crack.
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.