Crude Oil
Oil prices plummeted on Friday as the 3 year OPEC+ alliance with Russia ended in acrimony.
Brent crude futures dropped $4.73 to settle at $45.27 a barrel. WTI futures fell $ 4.62 to settle at $41.28 a barrel.
It was Brent’s lowest closing price since June 2017 and lowest percentage loss (9.4%) since December 2008. WTI posted its lowest close since August 2016 and largest daily percentage loss since November 2014.
Over the weekend, the world’s largest oil exporter engaged in an all-out price war on Saturday by slashing pricing for its crude by the most in more than 30 years. Saudi Arabia plans to boost oil output next month to well above 10 million barrels a day, as the kingdom responds aggressively to the collapse of its OPEC+ alliance with Russia, according to Bloomberg.
At the time of writing Brent is priced at $31.81, nearly $ 13.50 lower DoD. WTI is similarly lower at $ 27.87. Markets are honestly in chaos and it would take a while to figure out where prices will settle from this shock before returning to long term means.
At a global level, the death toll from the COVID-19 in rose to 3,830 (+445 over the weekend) yesterday, with the total number of confirmed infections at 110,077 (+12,655 over the weekend). While the number of fresh cases does seem large, the growth factor of new cases has steadily been declining over the past three days from 1.32 on March 3, to 0.98 yesterday.(Click here for details).
In the midst of all this carnage, China’s crude oil imports over the first 2 months of 2020 rose 5.2% YoY, to average 10.47 MB/D, earlier despite the spread of the coronavirus, customs data showed on Saturday, as refiners built up inventories of feedstock ahead of the Lunar New Year holiday.
Japan’s economy shrank faster than initially estimated in Q4’19, shrinking 7.1% annualized, to mark the biggest drop in more than five years as capital expenditure slumped, casting a deeper shadow over the outlook as the coronavirus hit heightened recession risks.
Oil product sales in Japan, including gasoline and jet fuel, slumped more than a quarter last week, while jet fuel sales sunk nearly 80% as Japanese and global airlines cancelled flights, but Idemitsu, JXTG and Cosmo say they are not planning to cut production.
US energy firms added oil rigs for the 4th time in 5 weeks, adding 4 rigs to total 682 (-152 YoY), the highest since Dec’19, even though ExxonMobil said it would join other producers and reduce new drilling this year, according to Baker Hughes.
The CFTC said money managers cut their net long US crude futures and options positions in the week to 3 Mar’20, cutting its combined futures and options position in New York and London by 31,051 contracts to 117,535 during the period.
Naphtha
Asia’s naphtha crack was up 2 cents to a three-session high of $45.73 a tonne.
The March crack has jumped – $0.00 / bbl.
The April crack is at – $2.65 / bbl.
Gasoline
Asia’s gasoline crack rose to a 1-1/2 week high of $5.53 a barrel on Friday due to refinery production cuts.
Gasoline stocks held at ARA rose 9% in the week to Thursday to reach a three-week high of 1.2 million tonnes.
The March crack is higher at $7.50 /bbl.
The April crack is at $6.35 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10 ppm gasoil were at a discount of 3 cents per barrel to Singapore quotes on Friday, compared with an 8-cent discount on Thursday.
China’s gasoil exports closed at 2.1 million tonnes in February, significantly higher than 1.3 million tonnes in January and last year’s average of 1.8 million tonnes per month, according to Refinitiv oil research assessments.
Gasoil stocks in ARA rose by 34 KT to 2.15 million tonnes in the week ended March 5.
Cash discounts for jet fuel narrowed to 13 cents per barrel to Singapore quotes on Friday, compared with a discount of 20 cents per barrel on Thursday.
The March crack for 500 ppm Gasoil is higher at $10.50 /bbl with the 10 ppm crack at $ 11.40 / bbl. The regrade is at -$ 1.50 /bbl.
The April crack for 500 ppm Gasoil is at $10.45 /bbl with the 10 ppm crack at $ 11.10 / bbl. The regrade is at -$ 1.65 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The cash differential for 0.5% VLSFO in Asia edged higher on Friday, after a firm cargo deal value in the Singapore trading window, recouping some of its weekly losses.
The VLSFO cash discount was at minus $3.84 a tonne to Singapore quotes, up from minus $4.67 a tonne in the previous session. The cash differential was at a 90 cent discount at the start of the week.
Meanwhile, residual fuel inventories in the Amsterdam-Rotterdam-Antwerp (ARA) and Fujairah bunkering and storage hubs fell this week, while those in Singapore rose. Fuel oil stocks in the ARA refining and storage
Fuel oil inventories in ARA fell 15% to a 2020 low of 986 KT in the week ended Thursday. Compared with last year, the ARA fuel oil inventories were 27% higher and above the five-year seasonal average of 959 KT.
The March crack for 180 cst FO is higher at -$5.45 /bbl with the visco spread at $0.75 /bbl.
The April crack for 180 cst FO is at -$5.95 /bbl with the visco spread at $0.85 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
While we would not hesitate to recommend hedging all April cracks at current levels today, we are of this opinion that the crack market may well be volatile given the price fluctuation in crude. Hence we are not recording any hedges 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.