Crude Oil
Oil prices rose almost 2 percent on Wednesday as traders chose to focus on the sharp drop in Crude oil imports due to sanctions on Venezuela., and as lead member Saudi Arabia said it would reduce its output in March by an additional 500,000 barrels. Brent crude gained $ 1.19 to settle at $63.61 a barrel. WTI crude rose 80 cents to settle at $53.90 a barrel.
Markets were primarily boosted by a statement by U.S. President Donald Trump on Wednesday that trade talks with China were “going along very well” before high-level parley. This led to hopes on spurring economic growth.
However, apart from the bearish DOE data, the International Energy Agency said in its monthly market report on Wednesday that the global oil market remains well supplied, and output should still outstrip demand this year. U.S. crude output is expected to grow by 1.45 million bpd this year and by another 790,000 bpd next year to hit 13 million bpd in 2020.
The DOE report from the US was decidedly bearish notwithstanding the sharp drop in crude imports to a record low as sanctions on Venezuela began to take effect. A sharp drop in refinery runs (85.9%) led to crude stocks building while an equally sharp drop in product demand led to significant builds on products.
Crude Imports fell to a record low of 6.2 million barrels a day as the sanctions on Venezuela began to show an impact. However the impact was softened by refinery turnovers. Refinery runs have not been below 86% since March 2017 (except for 1 point in October 2017).
What was more disappointing from an economic perspective was the drop in demand for both gasoline and distillates which seem to be painting a different perspective for growth from the payrolls and unemployment numbers.
Naphtha
Asia’s naphtha crack eased to a two-session low of $40.65 a tonne on Wednesday as strong demand was countered by a high Brent crude price and weakening gasoline fundamentals.
South Korea’s Hanwha Total, Singapore’s PCS and Taiwan’s Formosa were seeking naphtha for March. Hanwha Total may have paid a premium higher than its most recent purchases made on Jan. 21 but this could not be directly confirmed. The petrochemical maker had on Jan. 21 bought cargoes for first-half March arrival at premiums of $2 to $3 a tonne to Japan quotes on a cost-and-freight (C&F) basis. Formosa, Asia’s top naphtha importer, and PCS are expected to award their tenders from Thursday.
The February crack has dropped to -$ 7.35 /bbl. The March crack is at -$ 7.50 /bbl
Gasoline
Asia’s gasoline crack fell to a discount of 63 cents a barrel versus a discount of 46 cents in the previous session due to oversupply.
Gasoline inventories at key trading, storage and refining hubs remain at high levels. Stocks in Fujairah were at 11.3 million barrels virtually unchanged from previous weeks.
The February crack has recovered a little to -$ 0.85 /bbl. The March crack is at -$ 0.50 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10ppm gasoil were at 43 cents a barrel to Singapore quotes, compared with a discount of 35 cents a barrel on Tuesday.
The Feb/March spread widened by a cent to a discount of 45 cents a barrel on Wednesday, compared with 44 cents per barrel a day earlier.
Upcoming spring maintenance outages at some of the regional refineries would likely curb gasoil supply over the next couple of months, but some traders said the availability might not be as tight as expected, thanks to more shipments coming out of China.
Middle distillate stocks in Fujairah rose by 90 kb to 2.36 million barrels. Stocks are more or less at the same level as the last year.
Cash discounts for jet fuel widened to 34 cents a barrel to Singapore quotes on Wednesday, compared with a discount of 29 cents a barrel on Tuesday.
The February crack has improved to $ 13.00 /bbl with the 10 ppm crack at $13.95 /bbl. The regrade has dropped to $ 0.15 /bbl.
The March crack is $ at 13.70 /bbl with the 10 ppm crack at $14.65 /bbl. The regrade has flipped to a discount at – $ 0.10 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s cash premiums for mainstay 380-cst high-sulphur fuel oil edged higher on Wednesday but remained within close sight of an eight-month low touched in the previous session.
Cash premiums for 380-cst high-sulphur fuel oil (HSFO) were at $2.64 a barrel to Singapore quotes, compared with $2.62 a barrel on Tuesday, the lowest since June 2018. Cash differentials for 380-cst HSFO, which have dropped about 30 percent in the last month, are still at their strongest for this time of the year since 2015.
The prompt-month time-spread for 380-cst narrowed by 75 cents to $2.25 a tonne on Wednesday.
The 380-cst barge crack to Brent crude for February inched up two cents to minus $2.25 a barrel from minus $2.27 on Tuesday during Asian trading hours.
The 180-cst fuel oil crack to Dubai crude rose to a premium of $1.65 a barrel on Wednesday, compared with $1.12 per barrel a day earlier.
Fuel Oil stocks in Fujairah dropped by 917 kb to 7.82 million barrels. Stocks are however 50% higher than the previous year.
The February 180 cst crack has improved to $ 1.85 / bbl with the visco spread at $ 0.55 /bbl.
The March180 cst crack is at $ 1.65 / bbl with the visco spread at $ 0.60 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh hedges for today.
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.
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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.