Crude Oil
Oil prices were down slightly on Wednesday, pressured early by data showing big increases in U.S. refined products. Brent futures lost 49 cents to settle at $64.00 a barrel. WTI crude fell 42 cents to settle at $57.81 per barrel.
The US and China signed Phase 1 of their trade agreement yesterday. Under the agreement, China will buy $18.5 billion more in U.S. energy products in the first year and $33.9 billion in the second. Trump said he would remove all U.S. tariffs on Chinese imports as soon as the two countries completed Phase 2 of their trade agreement, adding he does not expect there to be a Phase 3 pact.
Both oil benchmarks were also hit by a report from the OPEC that said the producer group expected lower demand for its oil in 2020 even as global demand rises, as rival producers grab market share.
Asian VLCC rates were seen falling below the key psychological mark of 100 Worldscale points Wednesday for the first time in 2020 due to sluggish demand, which is expected to erode the earnings of owners at a time when their expenses have increased because of the mandatory use of low sulfur marine fuels since 1 Jan’20.
DOE data
While the EIA reported a much-bigger-than-expected draw in crude inventories, gasoline stockpiles last week rose to their highest since February, while distillate inventories jumped to their most since September 2017. Crude production for the week ended Jan. 10 touched a record 13 million bpd.
The draw in crude is largely attributable to the fall in net crude imports. While gasoline demand recovered a bit, it is still low at 8.5 mb/d. Distillate demand has once again dropped to 3.2 mb/d. Demand for distillates has been low around this time of the year in the last couple of years.
The low demand figures notwithstanding, the increase in product stocks seem to be much larger than that show by our material balance statement above.
Naphtha
Asia’s naphtha crack slipped 0.87% to $100.15 per tonne on Wednesday.
Naphtha arriving in Asia this month from the Middle East, estimated at up to 2.3 million tonnes, is down about 10%, compared with December levels. The UAE’s naphtha exports in January dived to an 11-month low of 800 KT, compared with 1.1 million to 1.2 million tonnes in December. February naphtha arriving next month from the Middle East is expected to be lower than 2 million tonnes.
Demand for the fuel in the meantime has been brisk, although several crackers across Asia had trimmed throughput by 5%-10% to combat high feedstock naphtha costs. The ethylene-naphtha spread remained below the $250 per tonne mark, a level that makes it lucrative for crackers to run at maximum mode.
The January crack is higher at – $ 2.90 / bbl.
The February crack is at – $ 3.10 / bbl.
Gasoline
No fresh news on gasoline markets.
The January crack is lower at $ 5.00 /bbl
The February crack is at 6.45/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil were at 29 cents per barrel over Singapore quotes on Wednesday, down from 36 cents per barrel a day earlier.
The January/February time spread for 10 ppm gasoil narrowed on Wednesday to trade at a premium of 11 cents per barrel, compared with 33 cents a barrel in the previous session.
Middle-distillate inventories in Fujairah rose 17.9% from a week earlier to 4.3 million barrels in the week to Jan. 13, data via S&P Global Platts showed.
The January crack for 500 ppm Gasoil is lower at $ 11.00 /bbl with the 10 ppm crack at $ 11.45 / bbl. The regrade is at -$ 0.30 /bbl
The February crack for 500 ppm Gasoil is at $ 12.10 /bbl with the 10 ppm crack at $ 12.60 / bbl. The regrade is at -$ 0.10 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month crack for 0.5% VLSFO extended losses to hit its lowest in a month on Wednesday, widening the gap from record highs earlier in the month.
The front-month VLSFO crack dropped to $23.83 per barrel above Brent crude during Asian trade on Wednesday, down $1 a barrel from the previous session and the weakest since Dec. 16.
Meanwhile, residual fuel oil inventories in Fujairah fell by 940 kb (8%) to a two-week low of 10.27 million barrels in the week to Jan. 13. Compared with year-ago levels, however, the weekly fuel oil inventories at FOIZ were 36% higher.
The front-month VLSFO crack dropped to $24.836 per barrel above Brent crude during Asian trade on Monday, the weakest since Dec. 16. They were at $26.27 a barrel on Monday.
Sales of marine fuels, also known as bunkers, in Singapore hit a four-year low in 2019, but soared in the last month of the year as vessels globally switched to cleaner fuels to meet new emission rules this year.
Chinese maritime authorities found a South Korean-flagged container vessel using marine fuel that exceeds the sulphur cap under new global emission rules. In what appears to be one of the earliest cases of non-compliance with the International Maritime Organization’s (IMO) rules that started this year, the maritime authorities in east China’s Weihai port detected the ship’s emissions exceeded the proper level when docking there after sailing from South Korea’s Incheon.
The January 180 cst crack has weakened to -$ 13.70 / bbl with the visco spread at $ 2.20 /bbl.
The February 180 cst crack is at -$ 14.00 / bbl with the visco spread at $ 2.30 /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.