Crude Oil
Oil prices rose more than 1% on Wednesday following a drawdown in U.S. crude inventories from record highs and a string of positive manufacturing data, but a surge in coronavirus cases tempered gains.
Brent crude rose 76 cents to settle at $42.03 a barrel. U.S. crude rose 55 cents to settle at $39.82 a barrel.
Improving global economic activity supported prices as well. U.S. manufacturing activity rebounded in June, hitting its highest level in more than a year as the broader economy reopened. Germany’s manufacturing sector contracted at a slower pace in June, while French factory activity rebounded into growth.
The Saudi energy minister in recent weeks asked Angola and Nigeria to submit detailed pledges to carry out extra oil production curbs, threatening to ignite oil price war unless fellow OPEC members make up for their failure to abide by production cuts, according to a WSJ article.
Crude exports from LOOP are hitting a record high, quadrupling to 420 KB/D by 26 Jun’20, from 102 KB/D in Feb’20. Those Mars barrels are going to Asia, where refiners that normally process high volumes of similar Middle Eastern crude need to replace oil that OPEC is no longer supplying under record supply cuts that started in Apr’20.
Crude held on tankers fell below 150 MB by end-Jun’20, down from 180 MB in late Apr’20, while refined products held on vessels dropped to 50 MB from a mid-May’20 peak of close 75 MB, IHS Markit estimated, a sign fuel demand is recovering.
DOE data
U.S. crude inventories fell more than expected, dropping by 7.2 million barrels last week, after hitting all-time highs for three consecutive weeks, EIA data showed. Much of the draw down was also attributed to refiners ramping up production as refinery utilization rates rose by 0.9 percentage point to 75.5%, their highest since early April.
Gasoline demand dropped marginally, but distillate demand picked up, possibly due to commercial movement of goods.
The Material Balance statement, after a long time does not seem to be too widely out of sync with the reported data.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 518,058 (+4,847 DoD) yesterday, with the total number of confirmed infections at 10,795,100 (+196,901 DoD). This is the largest daily growth recorded. (Click here for details).
Naphtha
Asia’s naphtha for the second day on Wednesday to reach a five-session high of $82.90 a tonne.
The July crack is higher at $ 0.55 / bbl today. The August crack is at $ 0.30 /bbl
Gasoline
Asia’s gasoline crack similarly rose to a 5 session high of $2.37 a barrel.
European gasoline and gasoline components shipped to the United States in June at around 983,000 tonnes were more than twice the amount sent in May.
India’s fuel consumption rose in Jun’20 compared with May’20, with sales of gasoline and gasoil rising by 36% MoM to 2.04 MMT and 20% MoM to 5.54 MMT respectively. Gasoline and gasoil sales are still down by about 15% YoY and 17.1% YoY respectively.
The July crack is lower at $2.05 /bbl. The August crack is at $2.55 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for 10 ppm gasoil slipped on Wednesday. Cash premiums for 10-ppm gasoil fell to 73 cents a barrel to Singapore quotes on Wednesday, down from 88 cents per barrel a day earlier.
Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 19.1% to 4.1 million barrels in the week ended June 29, data via S&P Global Platts showed. The weekly stocks in Fujairah have averaged 3.9 million barrels so far in 2020, compared with a weekly average of 2.4 million barrels in 2019.
Global flight passenger demand, measured in revenue passenger kilometers or RPK’s, contracted 91% on the year in May’20, after falling 94% in April’20, the IATA said 1 Jul’20.
The July crack for 500 ppm Gasoil is lower at $5.40 /bbl with the 10 ppm crack at $ 6.25 / bbl. The regrade is at -$ 5.10 /bbl.
The August crack for 500 ppm Gasoil is at $5.55 /bbl with the 10 ppm crack at $ 6.35 / bbl. The regrade is at -$ 3.80 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash discounts for HSFO fell on Wednesday despite a surge in trade activity in the Singapore window, which shot up to a near 10-month high. Eight HSFO cargo trades were reported totalling 120 KT of 380-cst HSFO and 40 KT of 180-cst HSFO. Wednesday’s deal volume was the highest daily trade volume since Oct. 8, 2019.
Despite the increased buying appetite, weak supplier offers helped push cash differentials lower. The cash discount for 380-cst HSFO fell 90 cents to minus $3.62 a tonne to Singapore quotes, while the 180-cst HSFO discount widened by 36 cents to minus $3.31 a tonne.
By contrast, stronger bids for cargoes of 0.5% VLSFO helped narrow cash discounts of the fuel to a more than four-month high of minus $1.01 a tonne to Singapore quotes, but failed to attract suppliers with no trades being reported.
Fuel oil stocks held in the Fujairah oil hub edged down for a second straight week, slipping 1% in the week to June 22. Fujairah Oil Industry Zone (FOIZ) inventories for heavy distillates and residues fell by 427 KB from the previous week to 16.474 million barrels, data via S&P Global Platts showed. The inventories were 68% higher than year-earlier levels.
The July crack for 180 cst FO is lower at – $4.10 /bbl with the visco spread at $1.10 /bbl.
The August crack for 180 cst FO is at – $3.05 /bbl with the visco spread at $0.90 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
We will today hedge the August Naphtha Dubai crack at current value of $ 0.30 / 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 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.