Crude Oil
Oil prices rose 3% in volatile trade on Tuesday as Wall Street surged and the International Energy Agency (IEA) increased its oil demand forecast for 2020.
Brent futures rose $1.24 to settle at $40.96 a barrel. WTI crude rose $1.26 to settle at $38.38 a barrel.
The market was bolstered earlier when Wall Street opened higher after a record increase in May retail sales revived hopes of a swift post-pandemic economic rebound, with sentiment also lifted by data showing reduced COVID-19 death rates in a trial of a generic steroid drug. Gains, however, were capped by worries about a second wave of coronavirus cases as also a rise in US crude inventories.
In its monthly report, the IEA forecast oil demand at 91.7 million barrels per day (bpd) in 2020, 500 kbpd higher than its estimate in May’s report, citing higher than expected consumption during coronavirus lockdowns. Still, the agency said a fall in flying because of the virus outbreak meant the world would not return to pre-pandemic demand levels before 2022.
Oil supplies in May plunged by nearly 12 million bpd, the IEA said, with the OPEC+ – reducing their output by 9.4 million bpd. That means OPEC+ hit 89% compliance with agreed cuts in May, the IEA said. OPEC+ agreed this month to extend production cuts of 9.7 million bpd through July. It also called on members that have not been complying to make up commitments with extra cuts later.
Iraq, which had one of the worst compliance rates among the major producers, has already made deep cuts to its crude supplies to Asia in July. Iraq’s oil exports have fallen by 8% or 300 KB/D so far in Jun’20, with southern exports in Jun’20 so far averaging 2.93 MB/D. Iraq also made large reductions in planned supplies to Asia in Jul’20, suggesting Iraqi exports will fall more.
API Data
Crude and gasoline stocks built against expected draws. For distillates though, the stock build up was less than expected. We will wait for the official data to be released today.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 445,188 (+6,592 DoD) yesterday, with the total number of confirmed infections at 8,251,224 (+142,557 DoD). (Click here for details).
Infections are surging in Latin America, while the United States and China are dealing with fresh outbreaks. China sharply ramped up restrictions on people leaving Beijing in an effort to stop the most serious coronavirus flare-up since February from spreading to other cities and provinces.
Naphtha
Asia’s naphtha refining margin was at a 1-1/2-month high of $64.60 a tonne, lifted by both gasoline and demand for the fuel from the petrochemical sector.
The July crack is higher at -$0.10 / bbl.
Gasoline
Asia’s gasoline crack hit a three-month high of $2.78 a barrel over Brent crude on Tuesday, as hopes of a demand recovery due to easing lockdown measures offset concerns of a resurgence of COVID-19 infections.
Indian state fuel retailers’ gasoline sales jumped 63% to 903,000 tonnes in the first half of June, compared with the same period last month.
The July crack is higher at $3.95 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for 10-ppm gasoil rose to their highest in more than four months on Tuesday, aided by steady buying interest for physical cargoes, while refining margins for the fuel climbed for a second consecutive session to their strongest in eight weeks. Cash premiums for 10-ppm gasoil rose 10 cents to 77 cents a barrel to Singapore quotes, a level not seen since Feb. 4.
Meanwhile, cash discounts for jet fuel widened to 78 cents a barrel to Singapore quotes, compared with 59 cents per barrel a day earlier.
Floating storage for diesel in Europe has become uneconomic amid an erosion of the contango in middle distillate paper markets since Apr’20, while jet fuel floating storage continues to climb, despite only marginal economics, said traders.
China and the United States will each allow four weekly flights between the two countries, the U.S. Transportation Department said on Monday.
The July crack for 500 ppm Gasoil is higher at $6.55 /bbl with the 10 ppm crack at $ 7.40 / bbl. The regrade is at -$ 3.95 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash discounts for Asia’s 0.5% VLSFO narrowed to a month’s low on Tuesday but sentiment remained subdued due to ample supplies and weak spot bunker fuels demand amid a slowdown in global trade. The discounts narrowed to minus $5.85 a tonne to Singapore quotes on Tuesday, up from minus $6.99 a tonne on Monday and minus $7.83 a tonne last week.
The July crack for 180 cst FO is lower at – $2.65 /bbl with the visco spread at $1.35 /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.