Crude Oil
Crude oil continued its slide yesterday in the aftermath of the huge build reported by the EIA on Wednesday. Its slide was arrested somewhat with the news of an attack on a Nigerian pipeline.
The Brent contract settled at $46.35 after hitting a session low of $ 45.99. WTI settled at $ 44.66 / bbl.
It would be interesting to watch the happenings of today. A rise in prices, in the absence of any news, would indicate market squaring short positions heading into the weekend. A fall in prices however could mean the liquidation of strategic long positions which would put additional pressure on crude prices.
However, we feel that a floor to prices may not be far away with good refining margins for products coupled with drops in product stock inventories.
Naphtha
Naphtha once again showed strength in the spot market. Physical deals were reported at premiums to Japan prices, levels not hitherto seen for a long time.
The Naphtha crack is showing a value in excess of $2 / bbl for both Nov and Dec. Traders believe that this spark will last as long as the Colonial pipeline, which shut down due to an explosion in the US a couple of days ago, does not reopen. Estimates for reopening range from one week to one month.
Gasoline
The gasoline crack levels appear unchanged over yesterday. The gasoline crack is quoting around $ 13.2/bbl for November and close to $ 12 for December.
This crack is a bit of an enigma to call. It is currently strong because of shortness of stocks and good demand in Asia coupled with the damage to the Colonial pipeline. Now, if the winter in the US is mild (temperatures are expected to be above average), we will continue to see good draws there and robust demand resulting in higher cracks. If China’s exports have dropped, there may well continue to be a shortage of supply.
We are mildly bullish on gasoline at this point in time.
Middle Distillates
Term product deals for 2017 are being finalized.
KPC has sold 500 ppm Gasoil at MOPAG + $0.60 ‘bbl and Jet at MOPAG + $0.30 /bbl
This is around a dollar lower than its prices for 2016. This drop reflects the change in sentiment in the markets over the past year.
Singapore distillate stocks climbed to a 6 week high of 13.2 Million Barrels
Middle distillate cracks have firmed up a bit nevertheless. Gasoil is quoting at around $ 14.00 / bbl for November and $ 13.2/bbl for December.
The regrade is still hugely negative for the rest of November -$0.80 /bbl and December is just a little above parity.
Fuel Oil
Fuel Oil continues to be strongly bid in the market as buyers outnumber suppliers. Stocks fell further this weel to 22.8 million barrells. Inventories have dropped by 1.5 million barrels over the last 6 weeks.
However, stocks are expected to build significantly in the next few weeks as cargoes head from the West to Singapore aided by the widening arbitrage in prices.
The November crack is showing a level of -$0.94 / bbl while the December crack is at -$ 1.7 / bbl. This is approximately 40 cents / bbl better than yesterday.
It is hard to call this market as it heads into stronger and virtually uncharted territory. Nevertheless, we believe that global fundamentals of the product are not so strong as to allow sustained maintenance of such levels.
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.