Crude Oil
Oil fell on Monday as U.S. trade disputes with Mexico and China deepened concerns about weakening global crude demand. The August Brent crude future, which became front month today, fell 71 cents to settle at $61.28 a barrel. WTI crude futures settled 25 cents lower at $53.25 a barrel.
Mexico said it would reject a U.S. idea to take in Central American asylum seekers if it is raised at talks this week with U.S. President Donald Trump’s administration, which is threatening the tariffs over immigration concerns.
The possibility of tariffs on Mexico comes on top of a drawn-out trade war between the United States and China that has bruised oil prices.
A downturn on Wall Street, which crude prices sometimes follow, worsened losses in oil futures.
Factory activity slowed in the United States, Europe and Asia last month as an escalating trade war between Washington and Beijing raised fears of a global economic downturn and heaped pressure on policymakers to step up support. Some economists predict a world recession and a renewed race to the bottom on interest rates if trade tensions fail to ease at a Group of 20 summit in Osaka, Japan, at the end of June, when presidents Donald Trump and Xi Jinping could meet.
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Saudi Arabia pumped 9.65 million barrels of oil per day (bpd) in May, a deeper cut than its production target under the global pact to reduce oil supply. The nation’s output target under the OPEC-led pact is 10.3 million bpd.
Naphtha
Asia’s naphtha crack recovered from a more than seven-year low to a two-session high of $7.92 a tonne on Monday.
Traders looked past the increase, given weak fundamentals, with gasoline and naphtha cracks substantially lower than a year ago at more than $7 a barrel and above $90 a tonne respectively. They added that supplies of open-specification naphtha were high due to recent slow demand caused by cracker maintenance and high volumes of European naphtha arriving in Asia previously.
These factors had recently flipped spot prices of the open-specification grade to negative territory in South Korea and Taiwan. South Korea’s GS Caltex was looking to buy naphtha for July but the results were not immediately clear.
The June crack is lower at – $8.65 /bbl;
Gasoline
Asia’s gasoline crack was at a four-session high of $2.19 a barrel, lifted by a drop in oil prices..
The June crack is lower at $ 3.50 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a discount of 2 cents a barrel to Singapore quotes, compared with a premium of 3 cents per barrel on Friday.
Cash discounts for jet fuel narrowed to 8 cents a barrel to Singapore quotes, compared with a discount of 16 cents per barrel in the previous session.
The June/July time spread for jet fuel narrowed its contango structure by a cent to be at a discount of 1 cent a barrel on Monday.
The June crack for 500 ppm Gasoil is lower at $ 12.90 /bbl with the 10 ppm crack at $ 13.60 / bbl. The regrade is at -$ 0.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s cash premiums for 380 cst fuel oil rose on Monday, buoyed by expectations for tighter supply and rising seasonal demand in the Middle East.
Cash differentials for 380-cst were at a premium of $1.80 a tonne to Singapore quotes, compared with $1.77 on Friday. The more actively traded 380-cst barge crack to Brent crude for May dipped to minus $6.60 a barrel during Asian trading hours, against minus $6.51 on Friday.
The June180 cst crack is lower at – $ 1.30 / bbl with the visco spread at $ 1.80 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The strengthening of the fuel oil market reflects the bullish undercurrent of the market. We will hedge the August crack at -$1.00 /bbl. If the July crack goes into a premium, we will hedge that as well in the future.
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.