Crude Oil
Oil prices dipped on Wednesday ahead of a meeting of the world’s biggest exporters, who will discuss cutting output to help shore up prices and curb excess supply. Brent crude oil fell 52 cents to settle at $61.56 / bbl. U.S. crude settled down 36 cents to $52.89 a barrel.
The markets are extremely volatile ahead of the OPEC meeting today which will determine if, and by how much, crude supply is to be cut. Brent made a session high of $63.29 a barrel and a low of $60.80. WTI crude futures traded between $51.44 a barrel and $52.16.
The consensus market expectation appears to be a cut between 1.3 and 1.4 million barrels. Any significant difference from this number is likely to move prices a lot.
In our estimate, the actual number is more likely to be less than this number than more for the following reasons.
- Saudi has said it will cut only if OPEC agrees to do so as a group.
- Russia has said something similar with the added caveat that doing so during winter would be difficult.
- Iran has already said it would not join a cut as it is the victim of sancitons.
- Qatar has said it will quit OPEC because its voice is hardly ever heard anyway. This sentiment is echoed by many other small participants in OPEC.
- Kuwait, which many people regard as the 51st state of the US, would be under pressure to not cut given the continuous verbal pressure being applied by Trump.
Saudi Arabian crude supply in November rose to 11.3 million barrels per day according to a source familiar with the matter.
The market awaits the DOE statistics today.
Naphtha
The naphtha crack to Brent crude slipped to a four-session low of $33.63 a tonne, down from $44.30 a tonne on Tuesday. On Nov. 12, the naphtha crack hit $9.88 a tonne, its lowest in more than two years.
The December crack has dropped to -$ 4.60 /bbl
Gasoline
Singapore margins for 92 RON gasoline against Brent crude oil hit minus $1.55 a barrel on Wednesday, down from minus $1.44 a barrel in the previous session, and the lowest level since November 2011. Gasoline has come under intense pressure from swelling supply, and despite a one-third plunge in the cost of crude oil since early-October.
Stocks in Fujairah have increased to over 10 million barrels last week. In South Korea, another Asian refinery hub, gasoline output and inventories are also high.
Meanwhile, import demand in Vietnam has shrunk because of the start-up of the country’s Nghi Son oil refinery, while output in the Middle East is set to increase.
The December crack has however improved to $ 0.55 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asian gasoil prices plunged on Wednesday as a flurry of cargoes from China entered the market after Beijing awarded more export quota to refiners late last month.
Unipec, the trading arm of China’s state-owned Sinopec, has provisionally booked two long-range tankers to ship diesel from China to Singapore, with an option to head to Europe. Oil trader Vitol has fixed a vessel to ship diesel from North China to Australia while Freepoint Commodities has provisionally booked a medium-range tanker to ship diesel from Dongguan to Singapore, according to the fixtures.
Middle Distillate Stocks in Fujairah rose marginally to 2.32 million barrels in the week to December 3.
The December crack has dropped to $ 12.50 /bbl with the 10 ppm crack at $ 13.25 /bbl. The regrade is higher at $ 2.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash premiums for Asia’s mainstay 380-cst fuel oil fell for a second straight session on Wednesday, despite trade volumes for physical cargoes remaining elevated in the Singapore window.
The 380-cst fuel oil cash premium slipped to $5.95 a tonne to Singapore quotes on Wednesday, down from $7.56 a tonne in the previous session . Intense buying interest on Monday had boosted the premium to a two-week high of $8.97 a tonne to Singapore quotes.
The traded volumes of physical fuel oil cargoes in three trading days of December have now, at 660 KT, are at over 85% of the volume of trade in November.
Fuel Oil stocks in Fujairah dipped by 163 KB to just above 6 million barrels.
The December 180 cst crack has eased to +$ 2.95 / bbl with the visco spread at $ 0.55 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to report.
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.