We are back today after a week off for internal reasons. Apologies to those of you who missed our reports
Crude Oil
Crude prices jumped 4-7% on Friday to their highest levels since March, on strengthening fuel demand as countries around the world eased travel restrictions.
Brent crude settled at $32.50 /bbl, up $ 1.37. WTI futures gained $1.87 to settle at $29.43 /bbl.
Both contracts posted gains for the third consecutive week. U.S. crude gained 19.7% in the week and Brent crude rose 5.2% after a week of bullish news.
The IEA expects global crude inventories to fall by about 5.5 million barrels per day (bpd) in the second half. It also expects oil demand this year to fall by 8.6 million bpd, smaller by 690 kbpd than the decline it forecast last month. It expects non-OPEC supply to fall by 3.2 million bpd.
Record production cuts of nearly 10 million bpd by the OPEC+ group have kicked in for May and June, with Saudi Arabia, Kuwait, and the UAE pledging to cut beyond their commitments. Oman said on Friday that it is considering cutting output further in June as well.
US retail sales endured a second straight month of record declines in Apr’20, falling 16.4% MoM, while industrial production dropped by a historic 11.2% MoM, pulled down by a record 13.7% MoM dive in output at factories
Japan’s economy slipped into recession for the first time in 4-1/2 years, with its Q1’20 GDP contracting 3.4% QoQ, putting the nation on course for its deepest postwar slump as the coronavirus crisis takes a heavy toll on businesses and consumers.
The euro zone economy’s worst recession on record will be even deeper than forecast less than a month ago, according to a Reuters poll of economists who said the ECB will ramp up its bond-buying again next month.
US energy firms cut the number of US oil and natural gas rigs operating to an all-time low for a 2nd week in a row, cutting 35 rigs to total 339, as producers slash spending on new drilling, according to Baker Hughes.
Hedge funds and other money managers raised their bullish bets on US crude futures and options to the highest level in more than a year during the latest week, raising it by 15,514 to total 356,984 contracts, the US CFTC said on Friday.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 316,520 (+3,618 DoD) yesterday, with the total number of confirmed infections at 4,799,266 (+82,257 DoD). (Click here for details).
India, on Sunday, extended a nationwide lockdown to 31 May’20, as cases exceeded 90,000 and further clashes erupted between police and stranded migrants.
Naphtha
Asia’s naphtha crack hit a premium of $13.13 a tonne to Brent crude, up from a discount of $1.50 a tonne from the previous session, but spot prices fell on higher supplies on Friday. Demand for naphtha from the petrochemical sector remained strong.
However, supplies arriving in Asia from Europe, Africa and the United States are expected to cross the 2.2 million tonnes mark. May volumes have already hit a record of about 3 million tonnes.
The June crack is much higher today at -$3.70 / bbl.
Gasoline
Asia’s gasoline crack ended the week at a discount of 85 cents to Brent crude versus a discount of $1.70 in the previous session.
ARA Gasoline stocks fell by 74 kt, to 1.29 million tonnes.
The June crack is has also jumped to $0.30 /bbl, flipping from negative territory last week.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for jet fuel were at $2.20 a barrel to Singapore quotes on Friday, compared with a discount of $1.99 a barrel on Thursday.
The May/June time spread for jet fuel in Singapore narrowed its contango structure on Friday by 30 cents to trade at a discount of $2 per barrel.
Cash discounts for 10 ppm gasoil narrowed to $1.17 per barrel to Singapore quotes on Friday, as against $1.33 per barrel on Thursday.
Cash discounts for jet fuel narrowed to $3.58 a barrel to Singapore quotes, compared with $4.29 per barrel on Tuesday.
Gasoil stocks in ARA dropped 3% to 2.4 million tonnes in the week to May 14. ARA jet fuel inventories fell 7.7% to 769,000 tonnes. Compared with a year earlier, jet fuel stocks were up 2%, while gasoil inventories were 8% lower
The June crack for 500 ppm Gasoil is higher at $2.15 /bbl with the 10 ppm crack at $ 3.95 / bbl. The regrade is at -$ 2.70 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 0.5% very low-sulphur fuel oil (VLSFO) cash differential fell on Friday, giving up gains from earlier in the week as ample supplies and a sluggish demand outlook weighed on sentiment.
Cash discounts widened to minus $5.59 a tonne to Singapore quotes on Friday, down from minus $4.75 in the previous session and $4.71 a tonne at the start of the week. Cash discounts were at their narrowest since March 31 at minus $4.25 a tonne to Singapore quotes on Wednesday.
Residual fuel inventories in ARA slipped by 0.1% from the previous week to 1.743 million tonnes in the week to May 14. ARA fuel oil stocks hit a record 1.745 million tonnes in the previous week as storage utilization rose to 87% of capacity. Compared with last year, the ARA fuel oil inventories were 52% higher and were well above the five-year seasonal average of 1.274 million tonnes.
The June crack for 180 cst FO is higher at -$4.10 /bbl with the visco spread at $1.25 /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 refinery.
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.