Crude Oil
Oil prices rose modestly on Tuesday, but settled off the day’s highs as gloom persisted in the markets. Brent crude futures rose 12 cents to settle at $27.15 a barrel. WTI futures for May rose 65 cents to $24.01 a barrel.
Early in the session both Brent and WTI were trading up over 5%. U.S. gasoline futures , meanwhile, soared over 30% early day and closed up about 8%. However, the double whammy of the supply glut combined with the current bleak outlook for the virus made this rise unsustainable.
India’s state oil refiners are reducing crude processing as local fuel demand has tumbled due to lockdowns in much of the country, which is forcing the refiners, which own about 60% of India’s 5 MB/D refining capacity, to reduce runs as storage facilities fill up with unsold products.
ADNOC has notified contractors and suppliers that it will review existing deals to find ways to cut costs due to the steep slide in oil prices, according to three industry sources and a letter seen by Reuters.
Ineos, on Tuesday, postponed a major shutdown of the Forties crude pipeline, described as one of the largest maintenance projects of its kind, until Aug’20 at the earliest, caving in to rising pressure over the coronavirus pandemic. It was previously due to start on 16 Jun’20.
api data
The API has surprisingly reported a draw in crude stocks. The rest of the data too appears supportive for prices. Official data is released.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 18,907 (+2,383 DoD) yesterday, with the total number of confirmed infections at 422,829 (+43,749 DoD). (Click here for details).
India, the world’s third largest oil consumer, ordered its 1.3 billion residents to stay home for three weeks as of Tuesday. India is the latest big fuel user to announce restrictions on social movement that have destroyed demand for gasoline and jet fuel worldwide.
The US could become the global epicentre of the coronavirus pandemic, the WHO said on Tuesday.
Notwithstanding the WHO, the US President pressed his case on Tuesday for a re-opening of the US economy by mid-Apr’20 despite a surge in coronavirus cases, downplaying the pandemic as he did in its early stages by comparing it to the seasonal flu.
The Brazilian President on Tuesday took aim at the “hysteria” over the coronavirus and urged mayors and state governors to roll back lockdown measures that have brought Rio de Janeiro and Sao Paulo to near standstills.
Naphtha
Asia’s naphtha crack fell to a discount of $8.63 a tonne, down from a premium of $11.28 a tonne on Monday and its lowest level since June 6. This mirrors similar declines in European markets.
The outlook for naphtha looks increasingly bleak as scheduled Asian refinery turnarounds starting this quarter.
While pockets of demand have emerged in some parts of Asia in response to the falling prices and a gradual return of Chinese manufacturing activity extensive quarantine efforts there, an abundance of supply and limited demand will continue to weigh on market sentiment.
The April crack has recovered to -$7.30 / bbl.
Gasoline
Falling demand and rising supplies pushed Asia’s gasoline crack further into negative territory on Tuesday, widening its unusual discount to Brent crude to the lowest level since the aftermath of the global financial crisis in December 2008. The gasoline crack fell to a discount of $5.70 a barrel against Brent crude on Tuesday, down from minus $4.10 a barrel in the previous session.
The April crack has recovered to -$8.15 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asian refining margins for jet fuel crawled up on Tuesday, a day after plunging to a negative territory for the first time in more than eleven years. Refining margins or cracks for jet fuel were at 62 cents per barrel over Dubai crude during Asian trade, compared with minus 7 cents per barrel a day earlier.
Cash discounts for jet fuel widened to $1.71 per barrel to Singapore quotes on Tuesday, the widest since January last year. They were at a discount of $1.64 per barrel on Monday.
Cash differentials for 10 ppm gasoil narrowed their discounts by a cent to 23 cents per barrel to Singapore quotes on Tuesday.
The April crack for 500 ppm Gasoil has improved to $10.10 /bbl with the 10 ppm crack at $ 10.75 / bbl. The regrade is at -$ 7.85 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Rising crude oil prices helped pull down the front-month 380-cst HSFO barge crack from a near eight-month high on Tuesday. The front-month 380-cst HSFO barge crack widened its discount to minus $9.59 a barrel against Brent, compared with minus $8.76 a barrel in the previous session – its narrowest since July 31.
HSFO cracks have been supported by declining supplies of the fuel as refiners and consumers switched to producing and consuming lower-sulphur fuel alternative following the introduction of a global sulphur cap at the start of the year and as complex refiners bought up cheap supplies of the fuel for use as refining feedstock.
The April crack for 180 cst FO is lower at -$3.15 /bbl with the visco spread at $0.70 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
We believe that the regrade for 2Q2020 is extremely stretched from both ends i.e. Jet is too low while gasoil (10ppm) is too high. Hence we are laying on another consumer trance for this spread, buying it at current levels of -$7.10 /bbl
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.