Crude Oil
Oil futures were mostly steady on Wednesday as price support from a larger than expected decline in U.S. crude inventories was countered by a lull in equities. Brent crude futures settled at $61.82 a barrel, shedding 32 cents. WTI crude futures fell 14 cents to settle at $53.76 a barrel.
Oil prices briefly turned positive after the EIA report. A nearly flat day on Wall Street however, limited oil prices, which often follow equities. The U.S. Federal Reserve’s decision to hold interest rates steady, as expected, failed ot enthuse the markets.
The United States has told India it is considering caps on H-1B work visas for nations that force foreign companies to store data locally, widening the two countries’ row over tariffs and trade.
Global oil consumption rose last year at the slowest rate since 2014, as higher prices and broad deceleration in manufacturing activity and freight movements took their toll on fuel use and petrochemicals. Consumption is likely to rise even more slowly in 2019, given the further weakening of most manufacturing and freight indicators since the start of the year. If the global economy experiences a mid-cycle slowdown this year similar to those in 2014/15 or 2011/12, consumption growth could decelerate to as little as 1.0 or 1.2% in 2019. A full-blown global recession would obviously reduce growth even further, potentially well below 1.0 million bpd, and leave the market severely oversupplied.
DOE data
The DOE data was more bullish than expected by investors and this lent support to the markets. The crude draw was apparently caused by an increase in net imports to the tune of 450 kb /d. The supply demand gap of over 300 Kb/ d would have exacerbated the situation.
Gasoline demand remains very strong at 9.92 mb/ d. Nevertheless, as per our material balance report, an increase in production was more than sufficient to meet the increase in demand. The same can be seen in distillates where the fall in demand was offset by the increase in exports.
Naphtha
Asia’s naphtha crack more than doubled from the previous session to $18.20 a tonne on Wednesday, the highest since May 23, as demand rose and crackers returned to operation or started up.
Malaysian state oil company Petronas and Saudi Aramco have started operations at their new 1.2 million tonne per year naphtha cracker. South Korea’s LG Chem in the meantime has restarted its 1.27 million tpy naphtha cracker following an unexpected shutdown more than a week ago. Hanwha Total has also started up its cracker after a prolonged shutdown which started at the end of March.
On top of this positive news for sellers, buyers emerged this week to buy spot and term cargoes. Japan’s Mitsubishi Chemical bought naphtha earlier this week for second half July delivery at discounts in the low single digit a tonne level to Japan quotes on a cost and freight (C&F) basis. Asahi Kasei Mitsubishi Chemical had also bought naphtha this week but for second half August delivery at a slight discount a tonne level on a C&F basis, pegged to a 60 day pricing formula instead of the usual 30 days.
The July crack is higher at -$ 5.65 /bbl
Gasoline
No fresh news on the gasoline markets. Light Distillate stocks in Fujairah plummeted by over 10% to 9.1 million barrels in the week ending 17th June, S&P Global reported yesterday.
The July crack is higher at $ 4.80 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10ppm gasoil were at 1 cent per barrel to Singapore quotes, the lowest discounts since May 31, when the differentials had hit a premium of 3 cents a barrel. They were at a discount of 5 cents a barrel on Tuesday.
Cash differentials for jet fuel were at a discount of 10 cents a barrel to Singapore quotes on Wednesday, compared with a discount of 4 cents per barrel on Tuesday.
Middle distillate stocks in Fujairah rose by 132 KB to 2.1 million barrels last week.
The July crack for 500 ppm Gasoil is lower at $ 14.15 /bbl with the 10 ppm crack at $ 14.85 / bbl. The regrade is at +$ 0.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 380 cst high sulphur fuel oil (HSFO) front month time spread hit a near seven month high on Wednesday as tightening arbitrage flows into the Singapore trading and storage hub squeezed the near term supply outlook. The tighter supply outlook has also been supported by expectations of rising seasonal demand in the Middle East as well as concerns of supply disruptions amid heightened geopolitical tensions there.
The July/August 380 cst time spread widened its backwardated structure to $11 a tonne on Wednesday, up from $9.75 a tonne in the previous session and its highest since Nov. 29.
In the physical market, 380 cst HSFO cash premiums also hit a more than six month high on Wednesday after rising 16 cents per tonne from the previous session to $5.03 per tonne to Singapore quotes.
Inventories for heavy distillates and residues in Fujairah dropped 1.5 million barrels from the previous week to 10.21 million barrels in the week ended June 17, data via S&P Global Platts showed. Fujairah fuel oil inventories are now at an 11 week low. Compared with year ago levels, however, the weekly fuel oil inventories at FOIZ were 15% higher. Fuel oil stocks at FOIZ have averaged 10.017 million barrels so far in 2019. This compares with a weekly average of 7.9 million barrels in 2018.
The July180 cst crack is lower at – $ 1.10 / bbl with the visco spread at $ 1.60 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No Fresh action 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.
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.