1 Jun 2017

Crude Oil
Crude Oil prices collapsed yesterday but have bounced back overnight after API data reported a huge drop in crude stocks.  The expiring Brent front month contract settled $1.53 cents lower at $ 50.31 /bbl. The August contract, which becomes the front month today, settled at $ 50.76 /bbl. WTI settled $1.34 cents lower at $ 48.32 /bbl
The American Petroleum Institute reported a startlingly bullish draw in crude stocks in its weekly report yesterday. This has propped up prices this morning by close to 50 cents.  However, since it is accompanied by builds in products, we would advocate caution in reacting to it.  In other new, Libya’s production, as expected, is reported to be at 827 kbd.  Accompanied by increased output from Nigeria, this resulted in OPEC production for May being higher than April, the first time this has happened in 2017

API Data

As per the API, crude stockpiles dropped by 8.7 million barrels to 513.2 million in the week ending 26th May. This was against expectations of a 2.5 million barrel draw. Gasoline stocks built by 2.25 million barrels against expectations of a draw of 1.25 million barrels. Distillate stocks too built by 3.73 million barrels against expectations of a draw of 750 kb.

This data, while bullish at first glance given the drop in crude oil inventories, makes one pause when one looks at the build in gasoline and distillate inventories. All the more so when one considers the fact that this was expected to be a ‘bumper’ driving season.

We would await data from the DOE to draw further conclusions on the same.

Naphtha

Naphtha cracks have strengthened considerably overnight, arguably on the back of low crude prices. The June Japan Naphtha- Dubai crack is valued at -$0.80 /bbl.

Gasoline

Gasoline cracks are also much stronger. The June 92 Ron-Dubai crack is valued at $11.7 /bbl. We would watch this crack closely and, at slightly higher levels, sell it to hedge refining margins.

Distillates

Gasoil cracks are weaker at around $10.20 /bbl for June. The regrade, however has collapsed to $0.30 /bbl

Fuel Oil

The fuel oil market continued to gain in strength. The reasons could be various. For one, lower crude prices would have spurred demand on cheaper fuel oil prices. Secondly, high freight rates have effectively shut the East-West arbitrage.  This would lower expectations of stocks arriving this month.

In May, 6.1 million tons of fuel oil made its way to the East. While this is lower than the expectation of 6.5 million tons, it is still higher than last year’s average of 5.9 – 6.0 million tons.

The June 180 cst crack is valued at -$ 2.8 / bbl. The visco spread is at $ 1.20 / bbl

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.

Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity

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