Crude Oil
Oil prices rose over 3% on Wednesday as China reported its lowest daily number of new Covid 19 cases since late January, as per Reuters reports. Brent futures rose $1.78 to settle at $55.79 a barrel. WTI crude futures rose $1.23 to settle at $51.17 a barrel.
The highest settles for both futures since January came even as U.S. government reported a larger-than-expected weekly build in crude inventories.
The death toll from the COVID-19 in mainland China leapt to 1,366 (+252 DoD) yesterday, with the total number of confirmed infections at 59,841 (+15,111 DoD) as Hubei province begun including people who are diagnosed through new clinical methods, revising its old data and suspected cases.
OPEC has cut its forecast for global growth in oil demand due to Covid 19 by 230 kbpd – a fairly modest assessment compared with other forecasters. The U.S. government on Tuesday cut its growth forecast for this year by 310 kbpd. The demand concerns from the outbreak pushed Brent and WTI to their lowest in 13 months on Monday.
Despite recent gains, both benchmarks are still down more than 20% from highs reached in January.
DOE data
The DOE reported a huge build in crude stocks as net imports increased by around 800 kbpd. We believe that the imports, which increased by 363 kbpd, was the absorption of stocks which could otherwise have gone East. Exports are likely to have dropped due to the Covid 19 outbreak.
It is difficult to understand the drop in production of finished stocks given that refinery run rates actually increased from 87.4% to 88.0%. The material balance statement below has even more anomalies
The draw in gasoline stocks appears to have been understated. As such, given the inexplicable drop in production and coupled with the drop in demand, it seems inevitable that this sort of discrepancy would arise. However, in the case of distillates, the draw in stocks appears to be highly overstated as per the material balance report.
Naphtha
Asia’s naphtha crack was at a two-session low of $93.65 a tonne as firmer oil prices weighed.
Naphtha demand was mostly muted while Indian naphtha cargoes loading in February at close to 600,000 tonnes so far reflected a 13% drop versus January’s shipment. Middle East naphtha exports for February assessed at 2.1-2.2. million tonnes were also down from January’s estimates at 2.5-2.6 million tonnes.
The March crack has risen to – $ 1.60 / bbl.
Gasoline
Asia’s Asia’s gasoline eased to an around one-week low of $8.52 a barrel on Wednesday.
Light distillates stocks held in Fujairah, at nearly 8 million barrels in the week to Feb. 10, were 29% lower than a year earlier.
The March crack has dropped to $9.35 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil slipped 1 cent from a day earlier to 72 cents per barrel to Singapore quotes.
Middle-distillate inventories in Fujairah dropped 27.3% from a week earlier to 2.9 million barrels in the week to Feb. 10, data via S&P Global Platts showed. Stocks of middle distillates in the Fujairah oil hub have averaged 3.7 million barrels so far in 2020, compared with a weekly average of 2.4 million barrels in 2019. The weekly Fujairah middle distillate stocks were 25% higher than a year earlier.
Cash differentials for jet fuel were at a premium of 2 cents a barrel to Singapore quotes, compared with a premium of 3 cents per barrel a day earlier.
The February/March time spread for the aviation fuel widened its contango to trade at a discount of 15 cents per barrel, compared with a discount of 12 cents a barrel on Tuesday.
China’s aviation regulator said it will support restructuring or mergers to help airlines cope with the outbreak, noting that it has hurt the bottom lines of many carriers.
The March crack for 500 ppm Gasoil has dropped to $11.75 /bbl with the 10 ppm crack at $ 12.40 / bbl. The regrade is at -$ 1.35 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The 380-cst HSFO barge-crack for March slipped to minus $14.74 a barrel on Wednesday, just 10 cents a barrel lower than a near five-month high of minus $14.64 a barrel hit in the previous session. High crude oil prices could be impacting the crack. Despite plummeting demand for HSFO in bunkers, crack values of the residual fuel have risen steadily since the start of December amid fast declining output and strong demand from refiners for use in refining feedstock.
Residual fuel oil inventories in Fujairah fell by 982 KB (8%) from the previous week to 11.88 million barrels, S&P Global Platts data showed. The weekly fuel oil inventories were 52% higher than year-ago levels. Fuel oil stocks at Fujairah averaged 10.82 million barrels in 2019.
The March 180 cst crack has improved to -$ 8.30/ bbl with the visco spread at $ 1.15 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for today. The FO crack continues to improve. Our next target level would be -$ 7.5 / bbl. The regrade buy trade still remains attractive for consumers. The virus will eventually be controlled and a double whammy of fresh demand and stock dwindling will hit the market when it happens.
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.