Crude Oil
Oil fell nearly 3 percent on Thursday, with U.S. crude futures hitting lows not seen since April,due to growing concerns that global demand is weakening at a time when output from the world’s major oil producers is surging. Brent crude futures settled down $2.15, at $72.89 a barrel, while U.S. crude lost $1.62, to settle at $63.69, its lowest close since April 9.
The declines accelerated on Thursday after U.S. futures broke through $65, which had served as a buying level throughout the spring and summer. More than 750 million contracts changed hands, exceeding the 200-day moving average of 576 million contracts a day.
Record production from the United States and post-Soviet Russia, along with a big move upward in output from the OPEC, has culminated in a move to the exits by speculators. On Wednesday, the U.S. Energy Department said overall U.S. crude output hit a record 11.35 million barrels per day in August, and it is expected to keep growing. Russia is producing 11.41 million bpd, and a Reuters survey of OPEC production showed that group pumping out more oil daily since 2016.
The flood of oil is overwhelming any lingering worries that the market would be unable to offset further expected declines in exports out of Iran when renewed U.S. sanctions take effect next week. China’s manufacturing sector in October expanded at its weakest pace in over two years, hurt by slowing domestic and external demand, in a sign of deepening cracks in the economy from the trade war with the United States.
Oil has also been under pressure on growing concern over a possible slowdown in global growth as the U.S-China trade dispute remains unresolved, and is starting to hit emerging market economies in particular.
Markets anticipate more selling in coming days, noting that oil was unable to capitalize on weakness in the dollar on Thursday, nor did it benefit from a rebound in equity markets.
Naphtha
The Asian Naphtha margin, at below $50 a tonne, was the lowest front-month value seen since July 2017. The light distillates market is being battered by high supplies but refiners are not expected to cut runs as strong demand for gasoil, jet fuel and fuel oil outweighs the weakness in gasoline and naphtha..
The November crack has dropped to – $ 5.30 / bbl
Gasoline
Asia’s gasoline crack fell to $2.07 a barrel on Thursday, 29 cents away from a 27-month low seen on Monday.
Singapore’s onshore light distillates stocks rose after three weeks of drops, hitting a six-week high of 12.15 million barrels. The data showed that close to 60 KT of gasoline from the United Kingdom arrived in Singapore between Oct. 25 and Oct 31.
The November crack has dropped to $ 3.05 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for gasoil with 10ppm sulphur content slipped to 66 cents a barrel to Singapore quotes, the weakest since Oct. 10. Premiums were at 70 cents on Wednesday.
Cash differentials for jet fuel remained unchanged on Thursday at a discount of 1 cent per barrel to Singapore quotes.
Refinery turnarounds in the region are also keeping fuel supplies in check.
Singapore’s onshore middle distillates stocks rose after three weeks of drops to 9.51 million
The November crack has dropped to $ 17.10 /bbl with the 10 ppm crack at $ 18.00 /bbl. The regrade is lower at $ 0.55 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s prompt month-time spread soared to fresh highs on Thursday on continued signs of supply shortages in the Singapore trading and storage hub. The 380-cst Nov/Dec time spread was trading at about $11.50 a tonne on Thursday, up from about $10 a tonne in the previous session. The front-month time spread was last higher in May 2015.
Cash premiums for 380-cst fuel oil cargoes also soared into double-digit territory at $10.44 a tonne above Singapore quotes, their highest since June 2015, despite an absence of deals in the physical trading window. This came as shrinking net imports dragged Singapore fuel oil inventories down 16 percent to a six-week low in the week ended Oct. 31.
Singapore onshore fuel oil inventories fell 2.902 million barrels (about 433,000 tonnes) to 15.456 million barrels or 2.307 million tonnes.
The November 180 cst crack is higher at +$ 3.20 / bbl with the visco spread at $ 0.95 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Fuel Oil cracks still continue to rise. We will target a positive crack for 1Q19 before laying on a hedge there.
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.