Crude Oil
Oil ended lower on Wednesday after reports that Iran’s oil minister said divisions exist within the Organization of the Petroleum Exporting Countries, leading futures to give up earlier gains on OPEC-led production curbs and export cuts from Libya. Brent crude futures settled at $60.15 a barrel, down 5 cents on the day, while U.S. crude was down 50 cents at $51.15 a barrel.
Crude pared gains late in the session after reports that Iran’s Oil Minister Bijan Zanganeh told state television that the cartel had been unfriendly toward OPEC’s third largest producer.
The DOE reported a far smaller draw of crude oil stocks (1.2 million barrels) than the API. As mentioned yesterday, this was expected, because of the difference in the reports last week. Crude stocks are currently just below last year’s levels at this time of the year.
There was a surprise drop in crude production.
Refinery run rates dropped marginally to 95.1% from 95.5% the previous week. However, gasoline production appears to have soared as per our material balance statement below.
The material balance for crude seems to suggest significant stock build this week as compared to the reported draw. The same is the case for gasoline. However, the figures for distillate stocks seem to suggest a greater draw.
Distillate stocks would be the figure to watch going forward with the expected hike in demand due to the IMO regulations.
Naphtha
Asia’s naphtha crack was at a three-session high of $41.05 a tonne on Wednesday, boosted by demand.
Formosa Petrochemical Corp, Asia’s largest buyer of the fuel, had on Nov. 30 bought 50,000 tonnes of naphtha for first-half January delivery at a discount of between $7 and $8 a tonne level to its own price formula on a cost-and-freight (C&F) basis.
The December crack is lower at -$ 5.00 /bbl. The January crack is at -$ 4.50 /bbl
Gasoline
The gasoline crack persisted at discount levels in reflection of a heavily oversupplied market, this time at 81 cents a barrel versus a discount of $1.10 a barrel in the previous day.
Light distillate stocks in Fujairah rose by a massive 7% to 10.7 million barrels increasing the discomfort about gasoline margins in general.
The December crack is lower at $ 0.50 /bbl. The January crack is lower at $ 1.50 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil widened their discounts to 75 cents a barrel to Singapore quotes on Wednesday, compared with a 70-cents discount on Tuesday.
India, which is one of the key players in the region, posted diesel sales of 6.92 million tonnes in November, a drop of about 5 percent compared to the same month last year, and 1 percent lower than in October.
Cash differentials for the aviation fuel were at a discount of 73 cents a barrel to Singapore quotes on Wednesday. They were at a discount of $1 per barrel a day earlier. This level of discount has been the slimmest in about two weeks but the differentials were still at their seasonal lowest since 2009. Cash differentials are weak as there hasn’t been too much stockpiling for colder months so far this year due to expectations for a warmer winter in the region. The narrowing has probably been caused due to a reduction in the flat price and, in effect, the refining margin for jet on paper.
The December/January time spread widened to a discount of 73 cents a barrel on Wednesday, compared with 70 cents a day earlier.
Middle distillate stocks in Fujairah dropped by 800 KB to 1.5 million barrels which is almost a record low level since data began being compiled.
The December crack is lower $ 12.15 /bbl with the 10 ppm crack at $ 12.90 /bbl. The regrade is steady at $ 2.10 /bbl
The January crack has crashed to $ 13.00 /bbl with the 10 ppm crack at $ 13.80 /bbl. The regrade is steady at $ 2.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s prompt-month 380-cst high-sulphur fuel oil cash premiums fell to a three-session low on Wednesday as physical trade activity fizzled yet again in the Singapore trading window following sporadic spikes in the buying appetite for fuel cargoes.
Trade activity in the paper market was also muted on Wednesday with fuel oil cracks and spreads little changed from their previous settlements.
Higher fuel oil inventories over the past weeks and steady arbitrage arrivals into Singapore have weighed on market sentiment, bringing cash premiums, time spreads and cracks lower since their recent highs in November.
The 380-cst fuel oil cash premiums slipped to $4.30 a tonne to Singapore quotes, down from $4.90 a tonne in the previous session. Cash premiums on Friday were at a near three-month low of $4.25 per tonne.
Heavy distillate stocks in Fujairah rose by 488 KB to 6.49 million barrels.
The December 180 cst crack has dropped to +$ 0.50 / bbl with the visco spread at $ 0.55 /bbl.
The January 180 cst crack has dropped to -$ 0.25 / bbl with the visco spread at $ 0.55 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
This section unfortunately cannot be updated today due to reasons beyond our control.
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.