Crude Oil
Oil prices fell on Monday and Tuesday, with U.S. crude futures hitting an eight-month low. Brent crude futures settled $1.04 lower at $72.13 a barrel. WTI crude futures also fell 89 cents to settle at $62.21 a barrel.
Brent hit a session low of $71.18 a barrel, the lowest price since Aug. 16. U.S. The WTI session low was $61.31 a barrel, the weakest price since March 16.
The US had granted 180 day exemptions from Iranian oil purchases to 8 countries which account for 75% of Iran’s exports. This would severely mute the impact of sanctions on Iran who has said it has so far been able to sell as much oil as it needs.
Turkish President Tayyip Erdogan said the country, a top importer of Iranian oil, would not abide by the sanctions, which he said were aimed at “unbalancing the world. Iran has also urged the European Union to shield it from the US sanctions.
API Data
The API reported another massive crude build of 7.8 million barrels. Stocks in Cushing built by 3 million barrels as well. These builds in Cushing are partially being attributed to improvement in the pipeline infrastructure. If that is indeed the case, it would seem that the apparent shortage seen in the past was not really due to paucity of supplies.
Distillates continuing to draw more than expected is the only data that is supportive for prices today.
Naphtha
Asia’s naphtha remained trapped in a downward spiral as high supplies and weakening petrochemical margins sent the physical crack value to a 25-month low of $40.78 a tonne. Concerns of shrinking petrochemical margins were directly impacting the naphtha feedstock market.
Spot cargoes streaming out of the Middle East added to the bearish mood as demand so far has not been able to soak up the excess cargoes.
Abu Dhabi National Oil Company offered 75,000 tonnes of naphtha early December loading through a tender expected to be awarded later this week. ADNOC does not typically sell spot naphtha in the past but it has recently been offering cargoes in the spot market for September loading from Ruwais, followed by more offers for October, November and now December.
The November crack has dropped to – $ 6.45 / bbl
Gasoline
Asia’s gasoline crack, although not negative when measured against Brent, fell to a five-year low of $1.42 a barrel due also to high supplies. But refiners were not likely to reduce runs as demand for gasoil and jet fuel outweighs the weakness in light distillates.
The November crack has dropped to $ 2.55 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for 10ppm gasoil climbed to 59 cents a barrel to Singapore quotes on Monday. They were at 54 cents a barrel on Friday.
Jet cash discounts widened to 25 cents a barrel to Singapore quotes on Monday, compared with a discount of 12 cents on Friday.
The November crack has jumped back up to $ 17.00 /bbl with the 10 ppm crack at $ 17.90 /bbl. The regrade is higher at $ 0.70 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 380-cst fuel oil crack hit a 15-month high on Monday as the market grappled with the persisting crunch from reduced Venezuelan and Iranian exports while demand is strong. The crack was at a discount of about $5.63 a barrel, its narrowest discount since July 2017.
Supplies across key regions were down, with data from Fujairah, Singapore and Europe showing reduced fuel oil inventories. Singapore’s fuel oil stocks are down 38.5 percent from a year ago while Fujairah’s levels were down 25.1 percent. Fuel oil stocks held in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub were also down 29.2 percent year on year.
The November 180 cst crack is higher at +$ 4.40 / bbl with the visco spread at $ 0.80 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Fuel Oil cracks still continue to rise meteorically. Today we shall add one tranche more of December FO crack at $ 2.85 a barrel. This is in keeping with the principle of adding insurance. Bear in mind that our last hedge was $ 2.80 lower.
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.