Crude Oil
Oil prices tumbled more than 2% on Wednesday after a report that U.S. President Donald Trump weighed easing sanctions on Iran. Brent crude futures settled $1.57 lower at $ 60.81 /bbl. WTI crude futures settled $ 1.65 lower at $55.61 /bbl.
Market participants cited a report from Bloomberg that Trump discussed easing sanctions on Iran to help secure a meeting with Iranian President Hassan Rouhani later this month. The Bloomberg report, attributed to three unnamed sources, said then-National Security Advisor John Bolton argued against such a step. Bolton’s departure removes one of the strongest advocates of a hard line towards Iran from Trump’s White House.
Iran will not negotiate with the United States while sanctions on Tehran are still enforced by Washington, Rouhani told his French counterpart Emmanuel Macron in a phone call on Wednesday, Iranian state media reported.
OPEC on Wednesday cut its forecast for growth in world oil demand in 2020 by 60 KB/D to 1.08 MB/D, while demand for OPEC crude is seen falling 1.20 MB/D in 2020 to 29.40 MB/D.
The EIA also slashed demand forecasts this week.
US President Trump on Wednesday welcomed China’s decision to exempt some US anti-cancer drugs and other goods from its tariffs and announced a delay to scheduled tariff hikes on billions worth of Chinese goods
The US President also called on the Federal Reserve to push interest rates down into negative territory, a move reluctantly used by other world central banks to battle weak economic growth that risks punishing savers and banks’ earnings in the process.
DOE Data
The DOE, in consonance with the API reported another large draw in crude stocks. Over the last four weeks, crude stocks have depleted by over 24 million barrels. However, like last week, the draw is considerably more than our material balance statement would suggest. We are of the opinion that we should see a huge build in crude stocks soon.
Gasoline stocks also reported a small draw. The build in distillate stocks can be attributed to a drop in demand. Like crude stocks, the build in stocks is significantly less than that suggested by our Material Balance statement.
Naphtha
Asia’s naphtha crack slipped further to $ 22.68 per tonne.
Fundamentals have been persistently weak due to slow demand for a number of reasons including recent cracker outages in South Korea, cracker maintenance and volatility in oil prices.
But supplies were seen lower recently and that could help ease the oversupply situation. Middle Eastern supplies in September, at 2.2-2.3 million tonnes, are down by about 25% versus August, data from Refinitiv Oil Research showed.
The September crack is lower at – $ 6.25 / bbl.
The October crack is at – $ 5.45 / bbl.
Gasoline
Asia’s gasoline crack settled near a two week high of $ 6.94 / bbl.
Prices were supported by brisk trades in the Singapore cash market. A total of nine deals were done, the highest number of trades seen in a single session since March 15.
Indonesia’s Pertamina and India’s HPCL have outstanding tenders looking to buy gasoline for September and October delivery respectively.
Indonesia has higher import needs in September due to Cilacap’s refinery undergoing a planned turnaround. supported by brisk trades in the Singapore cash market. HPCL needs to import gasoline to plug a supply gap as refiners are taking turns to undergo maintenance to produce cleaner fuels for use in 2020.
The September crack is much higher at $ 8.60 /bbl
The October crack is at $ 7.25 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a premium of 2 cents a barrel to Singapore quotes on Wednesday, compared with a 3 cent premium on Tuesday.
Cash premiums for jet fuel were at 22 cents a barrel to Singapore quotes on Wednesday, compared with Tuesday’s level of 34 cents a barrel.
The September crack for 500 ppm Gasoil is higher at $ 16.80 /bbl with the 10 ppm crack at $ 17.60 / bbl. The regrade is at + $ 0.40 /bbl
The October crack for 500 ppm Gasoil is at $ 17.70 /bbl with the 10 ppm crack at $ 18.40 / bbl. The regrade is at + $ 0.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s cash differentials for 380-cst HSFO edged lower to a premium of $40.73 a tonne above Singapore quotes, compared with a record high of $41.78 per tonne on Tuesday.
The September/October time-spread for 380-cst HSFO narrowed to trade at a premium of $42.25 a tonne, compared with $48.50 a tonne on Tuesday, according to Refinitiv data.
The 380-cst barge crack to Brent crude dropped to minus $25.60 a barrel on Wednesday, as against minus $24.26 per barrel a day earlier.
The September 180 cst crack is higher at – 4.40 / bbl with the visco spread at $ 0.71 /bbl.
The October 180 cst crack is at – 9.90 / bbl with the visco spread at $ 0.95 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Cal20 Jet-Dubai has risen above $ 19.10 / bbl and as mentioned yesterday, we shall lay on a tranche of this crack.
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.