Crude Oil
Oil prices fell on Friday, with U.S. crude dropping more than 4%, on fresh trade tensions and record high U.S. crude production. Brent crude futures fell $1.44 cents to settle at $62.43 a barrel.. WTI fell $ 2.94 to settle at $55.17 a barrel.
While Brent settled 1.5% lower and WTI 4.1% lower for the week, both contracts posted their largest monthly gains in several months of 6% and 2.3% respectively.
Both benchmarks rose in November partly on expectations of the United States and China reaching an initial deal trade deal by the year-end, that could lift doubts over future demand for crude, along with it the health of the global economy. However, that has started to look less likely after China warned the United States on Thursday it would take “firm counter measures” in response to U.S. legislation backing anti-government protesters in Hong Kong.
Oil supply from the North Sea, where crude differentials have been hitting several year highs , is set to increase in January, sending a bearish signal.
A Reuters poll of 42 economists and analysts forecast Brent to average $62.50 a barrel next year, little changed from last month’s $62.38 outlook, which was the lowest prediction for 2020 in about two years. The benchmark has averaged about $64 per barrel so far this year.
US crude oil production in Sep’19 rose to a new record of 12.46 MB/D from 12.397 MB/D in Aug’19, the US government said in a monthly report on Friday.
OPEC and allied oil producers will consider deepening their existing oil output cuts by about 400 KB/D to 1.6 MB/D, Iraq’s oil minister said on Sunday. Their current deal, which agreed to cut supply by 1.2 MB/D from Jan’19, expires at the end of Mar’20.
India’s annual economic growth slowed to 4.5% in the Q3’19, its weakest pace since 2013, putting pressure on Modi to speed up reforms as five rate cuts by the central bank have failed to boost investments and could prompt the RBI to cut its repo rate by 25 basis points to 4.90% at its meeting next week.
Japanese manufacturing activity contracted again in Nov’19, as the Jibun Bank Final Japan Manufacturing PMI edged up to 48.9 on a seasonally adjusted basis, with export orders at their weakest in 5 months due to slowing foreign demand, including from China.
China’s factory activity unexpectedly expanded at the quickest pace in almost 3 years in Nov’19, as the Caixin/Markit Manufacturing PMI rose to 51.8 from 51.7 in the previous month with solid increases in output and new orders.
Naphtha
Asia’s naphtha crack surged 14.3% and ended the month at an almost two-year high of $123.75 a tonne as the supply crunch bit harder.
More buyers, including South Korea’s YNCC, LG Chem and Japanese Showa Denko were seeking cargoes, a day after Formosa, CPC, CNOOC and Hanwha Total had made their purchases for January.
The December crack is lower at – $ 1.55 / bbl.
Gasoline
No fresh news on the gasoline markets today. ARA Gasoline stocks fell by 46 KT to 746 KT.
The December crack is higher at $ 9.05 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asian refining margins for 10ppm gasoil extended losses from the previous session to fall to a four-session low of under $14.50 a barrel on Friday, weighed down by abundant supplies.
Although ARA Gasoil stocks declined by nearly 3% in the week to Thursday to reach an eight-and-a-half-month low of 2.34 million tonnes, the current levels were 15.1% higher than a year ago. Similarly, although the middle distillates inventories were at a two-week low, the current stock levels were still marginally higher than a year ago, official data showed..
The December crack for 500 ppm Gasoil is lower at $ 13.25 /bbl with the 10 ppm crack at $ 14.20 / bbl. The regrade is at $ 0.50 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month 0.5% very low-sulphur fuel oil (VLSFO) crack against Brent crude fell from a more than three-week high in the previous session while the front-month time spread fell sharply back into contango.
The December VLSFO crack snapped four straight sessions of gains after falling to $18.85 a barrel above Brent crude, down from $19.35 a barrel in the previous session, Refinitiv data showed.
The Dec/Jan VLSFO time spread dropped to a discount of $1 a tonne on Friday, down from a $6.50 a tonne premium in the previous session. Price fluctuations in the relatively new VLSFO derivative contracts have been wide amid relatively limited trade liquidity.
ARA residual fuel oil stocks dropped by 52 KT to 884 KT in the weak ended 28 Nov.
The December 180 cst crack is lower at -$ 25.15 / bbl with the visco spread at $ 1.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action 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.