Crude Oil
Oil prices dropped almost 1% on Wednesday following a surprise build in U.S. crude inventories. Brent crude settled 62 cents lower at $63.72 a barrel, and West Texas Intermediate oil fell 48 cents to $58.76 a barrel.
OPEC released a more bullish outlook for 2020, forecasting demand for its crude to average 29.58 million bpd next year, less than the group’s November output. OPEC’s expectation of a small deficit suggests a tighter market than previously thought. It had initially projected a 2020 supply glut, but U.S. shale output has grown more slowly than expected.
However, U.S.-China trade tensions continue to cloud the outlook for demand, with a Dec. 15 deadline for the next round of U.S. tariffs on Chinese imports approaching.
DOE data
U.S. crude stockpiles rose unexpectedly last week. At 447.9 million barrels, crude stocks were about 4% above the five-year average for this time of year, the EIA said. However, stocks at the Cushing, Oklahoma, delivery hub for WTI fell 3.4 million barrels last week, their biggest decline since February 2018.
Refinery utilization rates fell 1.3 percentage points last week to 90.6% of total capacity.
Apart from the drop in utilization rates, a sharp rise in crude imports seems to have contributed to the build in US crude stocks.
Finished motor gasoline consumption fell to 8.8 million barrels per day (bpd), the lowest since February, according to EIA data. Winter storms that brought heavy snows on several U.S. states last week impacted domestic gasoline demand and likely caused inventories to rise.
Our Material Balance statement (above) shows that the crude stock rise reported is far less than that indicated by the statement. However, the reverse is true for the gain in product stocks.
Naphtha
Asia’s naphtha crack rose for a fifth straight session on Wednesday to reach $123.55 a tonne, its highest level since Nov. 29, amid a persistent supply crunch.
Gasoline
No fresh news on the gasoline markets. Light distillate stocks in Fujairah rebuilt after a couple of weeks of severe draws. Stocks built by 719 KB to 5.38 Million barrels.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asian 10ppm gasoil profit margin was at a two-session high on Wednesday at $14.26 a barrel, but the overall average value for December so far is at least 9% lower versus the same period last month as ample supplies weighed.
Middle Distillate stocks in Fujairah rose by 322 KB to 3.70 million tonnes barrels. This is fresh record high for the year.
In Japan, kerosene stocks fell 87,000 barrels to 16.49 million barrels in the week to Dec. 7, data from Petroleum Association of Japan (PAJ) showed. Japan uses kerosene for heating and demand typical improves during the winter months.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 0.5% very low-sulphur fuel oil (VLSFO) market extended gains on Wednesday, supported by rising demand ahead of the 2020 sulphur cap.
With most suppliers now selling mostly IMO-compliant bunkers, available supplies of VLSFO are tightening. The front-month VLSFO crack climbed to near three-month high of $22.07 a barrel above Brent crude, up from $21.76 a barrel in the previous session.
The Jan/Feb VLSFO time spread also firmed, widening its premium to a near two-week high of $5.50 a tonne on Wednesday, up from a $3.25 a tonne in the previous session.
Residual fuel oil inventories in Fujairah fell for a third straight week to a near two-month low of 12.27 million barrels in the week to Dec. 9.
With most suppliers now selling VLSFO bunkers, supplies are starting to shrink, narrowing the price spread between VLSFO and cleaner burning and more costly gasoil.
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.