Crude Oil
Oil prices fell more than 2% on Wednesday as demand concerns as also the impact of the virus started weighing more on investor’s minds. Brent crude futures fell $1.38 to settle at $63.21 a barrel. WTI crude futures fell $1.64 to settle at $56.74 a barrel.
Prices extended losses in post-settlement trade on bearish API data.
Deaths from the new flu-like virus in China have risen to 17 with more than 540 cases confirmed, with cases now detected as far away as the United States. China is putting on lockdown a city of 11 million people considered the epicenter of the new coronavirus outbreak that has killed 17 and infected 571 as of end-Wednesday, as health authorities around the world work to prevent a global pandemic. Goldman Sachs said a potential drop in oil demand from top energy consumer China due to the outbreak of a new coronavirus could hurt crude prices by about $3 per barrel, countering concerns about Middle East supply disruptions.
Kazakhstan has suspended its oil exports to China after contamination was found in crude supplied by a Kazakh producer less than a year after a ‘dirty oil’ crisis broke in neighboring Russia.
api data
Data from the API showed an increase in inventories across the board. Gasoline stocks built for an 11th week in a row. All stock increases were much larger than anticipated by analyst guesstimates. Official data will be released today.
Naphtha
Asia’s naphtha crack extended losses for the third straight day on Wednesday, hitting a two-week low of $83.28 a tonne, while spot premiums remained firm on supply cuts due to refinery maintenance in the Middle East.
South Korea’s Lotte Chemical paid a premium of $22 to $23 a tonne to Japan quotes on a C&F basis in the previous session for naphtha, reflecting a spike of more than 29% versus $17 to $17.50 a tonne premium the petrochemical maker had paid on Jan. 9.
Overall, the current naphtha premiums are sharply higher than a year ago when the value was at most in a low single-digit premium level. The strong premiums persisted despite high volumes of cargoes arriving this month in Asia from the West and naphtha cracker run cuts in Asia.
The February crack is lower at – $ 4.00 / bbl.
Gasoline
Asia’s gasoline crack, in contrast to naphtha, recovered to a three-session high of $4.62 a barrel.
Supplies in the United States, however, were seen high. Shipments of European gasoline and gasoline components to the United States have remained low at about 202.700 KT so far in January. Europe exported around 990.9 KT of gasoline and components to the United States in December.
Light distillate stocks in Fujairah burgeoned by 502 KB to 6.35 million barrels, S&P Platts reported yesterday.
The February crack is lower at 5.10/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asian refining margins for 10 ppm gasoil plunged on Wednesday to their weakest since mid-2017, while cash premiums for the transportation fuel lingered near their lowest levels in over a month.
Cash premiums for 10 ppm gasoil in Singapore slipped to 15 cents a barrel to Singapore quotes on Wednesday, down from 18 cents per barrel on Tuesday.
Steady supply and a lack of buying interest have pushed gasoil margins to their lowest in more than 2-1/2 years, while an expected demand boost following a switch to cleaner marine fuels this year is yet to materialize.
Cracks for the benchmark gasoil grade in Singapore are currently at their lowest seasonal level in the last four years. Low demand has eroded distillate margins across the globe, prompting speculation that some refiners could start reducing processing rates. U.S. distillate margins dropped to their weakest since July 2018 this week, while European diesel margins fell below their 10-year average for this time of the year last week.
Cash premiums for jet fuel were at 40 cents per barrel over Singapore quotes on Wednesday, compared with 42 cents per barrel a day earlier.
China’s week-long Lunar New Year holiday, which starts later this week, is expected to boost aviation passenger demand in the region.
The February crack for 500 ppm Gasoil is lower $ 11.45 /bbl with the 10 ppm crack at $ 11.95 / bbl. The regrade is at -$ 0.55 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s physical and paper fuel oil markets were little changed in muted trade on Wednesday, ahead of the Lunar New Year holiday in China and other parts of Asia starting at the end of this week.
Residual fuel oil inventories in Fujairah jumped 15% to a six-week high of 11.79 million barrels in the week to Jan. 20. Compared with year-ago levels, the weekly fuel oil inventories at FOIZ were 40% higher.
China will give value-added tax rebate for bunker fuel that is served to supply international vessels at Chinese ports. The new policy, allowing producers to reimburse a 13% production tax, will take effect from Feb. 1. The policy is expected to encourage domestic production of the fuel, which currently is mainly imported at a rate of roughly for about 1 million tonnes per month.
The statement, however, did not mention any change in policy regarding wholesale exports of the ship fuel, which would also require producers to receive fuel export quotas from Chinese authorities.
Pakistan has prohibited the use of open-loop scrubbers by ships in its waters, the latest country to tighten restrictions on the use of the cleaning devices which strip sulphur from marine fuel and empty the residue in the sea, a regulatory note showed.
The February 180 cst crack has jumped up to -$ 10.90 / bbl with the visco spread at $ 1.30 /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.
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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.