Crude Oil
Oil prices continued to retrace on Thursday after a media report cast doubt on the possibility of an interim U.S.-China trade deal. Brent crude futures settled 43 cents lower at $ 60.38 /bbl. WTI crude futures settled 66 cents lower at $54.95 /bbl.
Oil futures extended losses after a senior White House official denied a Bloomberg News report that the United States was considering a temporary trade agreement with China. Earlier, prices had been supported on news that the world’s two largest economies made some concessions in their protracted trade war.
Adding to the bearish sentiment, the International Energy Agency said surging U.S. output would make balancing the market “daunting” in 2020. The Paris-based IEA kept its oil demand growth forecasts for this and next year at 1.1 million barrels per day and 1.3 million barrels per day, respectively.
Oil prices also stumbled after comments from Saudi Arabia’s new energy minister, Prince Abdulaziz bin Salman, said deeper cuts would not be decided upon before the OPEC meeting planned for December.
Oil was pressured further after the European Central Bank cut its deposit rate to a record low -0.5% from -0.4% and said it will restart bond purchases of 20 billion euros a month from November to prop up euro zone growth.
Naphtha
Asia’s naphtha crack eased 8 cents to a four-session low of $22.60 a tonne on Thursday as abundant supplies persisted.
This was reflected in this week’s deal in which Formosa Petrochemical Corp locked in about 100,000 tonnes of open-specification naphtha for second-half October arrival at Mailiao at a discount within the $2 to $3 a tonne level to its own price formula on a cost-and-freight (C&F) basis. Although discounts were narrower compared to the discount levels between $4 and $5 Formosa had recently paid for first-half October cargoes, prices remained at discounts due to oversupply.
The September crack is lower at – $ 6.45 / bbl.
The October crack is at – $ 5.55 / bbl.
Gasoline
Asia’s gasoline crack jumped 13.5 percent or 94 cents to reach a near 2-month high of $7.88 a barrel as inventories eased on demand.
Singapore’s onshore light disttillate inventories edged down by 128 kb barrels to reach a three-week low of 11.157 million barrels in the week to Wednesday, data from Enterprise Singapore showed. .
The September crack is higher at $ 8.65 /bbl
The October crack is at $ 7.35 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a discount of 8 cents a barrel to Singapore quotes on Thursday, compared with a premium of 2 cents per barrel on Wednesday.
Cash premiums for jet fuel were at 28 cents a barrel to Singapore quotes on Thursday, compared with 22 cents a barrel in the previous session.
Singapore’s onshore middle disttillate inventories rose 140 kb to a two-week high in the week to Sept. 11, data from Enterprise Singapore showed on Thursday.
The September crack for 500 ppm Gasoil is lower at $ 16.30 /bbl with the 10 ppm crack at $ 17.15 / bbl. The regrade is at + $ 0.40 /bbl
The October crack for 500 ppm Gasoil is at $ 17.35 /bbl with the 10 ppm crack at $ 18.05 / bbl. The regrade is at + $ 0.20 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s cash premium for 380-cst high-sulphur fuel oil rose to a fresh record on Thursday, while the backwardated structure on the prompt-month time spread for the heavier distillate widened.
The HSFO cash premium climbed to $45.75 per tonne above Singapore quotes on Thursday, up from the previous high of $41.78 per tonne hit on Tuesday.
The prompt-month spread for 380-cst HSFO widened on Thursday to trade at a premium of $56.25 a tonne, up from $42.25 a tonne on Wednesday.
Singapore’s onshore Fuel Oil inventories dropped by 1.2 million barrels to a four-week low in the week to Sept. 11, data from Enterprise Singapore showed on Thursday. This comes after inventories for heavy distillates and residues in Fujairah fell 13.6% from a week ago to 10.23 million barrels in the week to Sept. 9.
Asian fuel oil supplies are tight as traders are not bringing in cargoes to the region as the market is still in steep backwardation. The fuel oil cracks in the prompt have really shot up due to the shortage of material.
The viscosity spread has turned negative in a scenario that may not have been envisaged were it not for the transition of fuel specifications.
The September 180 cst crack is skyrocketed to + $ 3.55 / bbl with the visco spread at – $ 0.71 /bbl.
The October 180 cst crack is at – 4.05 / bbl with the visco spread at $ 0.95 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Given the phenomenal rise of the Fuel Oil cracks today, we shall lay on a tranche of October Fuel Oil crack at today’s levels. In this sort of volatility, one could lose a lot of money on either side. However, since this is the first tranche of a fresh level of hedging, we would recommend to refiners to hedge this.
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.