Crude Oil
Oil prices soared on Friday, with U.S. futures closing out May with record monthly gains, on hopes that the U.S.-China trade deal would remain intact.
The front month Brent contract rose by $1.81 to $37.84 a barrel. The July Brent contract expired 4 cents higher at 35.33. WTI crude futures rose by $1.78 to $35.49 a barrel.
Both benchmarks saw steep monthly rises due to falling global production and expectations for demand growth as parts of the United States, including New York City, and other countries move to reopen after coronavirus-related lockdowns. WTI recorded an all-time high monthly rise of 88% after trading negative last month. Brent logged an increase of about 40% for its strongest monthly bounce since March 1999.
OPEC+ ministers are considering moving up their meeting to 4 Jun’20 instead of the previously scheduled 9-10 Jun’20, so that Jul’20 nominations can factor in any changes to oil production quotas, according to people familiar with the discussions..
U.S. President Donald Trump said his administration will begin to eliminate special treatment for Hong Kong in response to China plans to impose new security legislation in the territory, but he did not say the first phase of the Washington-Beijing trade deal was in jeopardy.
Japan’s factory activity shrank at the fastest pace since Mar’09 in May’20, with the au Jibun Bank Manufacturing PMI falling to a seasonally adjusted 38.4, as manufacturers widely struggled with the demand blow from the coronavirus pandemic.
South Korea’s manufacturing activity shrank at the sharpest pace in more than a decade in May’20, with the IHS Markit PMI edging down to 41.3 (-0.3 MoM), as worldwide lockdowns continued to weigh on demand and production.
China’s factory activity unexpectedly returned to growth in May’20, with the Caixin/Markit Manufacturing PMI rising to 50.7 (+1.3 MoM) as strict measures to contain the coronavirus outbreak were eased.
US energy firms cut 15 oil rigs in the week to 29 May’20 to total 222 (-575 YoY), the lowest since Jun’09, the fourth week in a row the US count fell to a fresh record low, according to Baker Hughes.
Money managers raised their net long US crude futures and options positions by 13,581 contracts to total 393,793 in the week to 26 May’20, the US CFTC said on Friday.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 373,697 (+3,191 DoD) yesterday, with the total number of confirmed infections at 6,259,249 (+108,767 DoD). (Click here for details).
Naphtha
Asia’s naphtha crack hit a fresh one-week low of $41.08 a tonne on Friday as demand slowed following a string of purchases earlier this week.
Naphtha spot prices however have flipped to premiums for July cargoes versus mostly discounts for June and second-half May cargoes. Asia is structurally short of naphtha and relies heavily on the Middle East and the West to fill the supply gap.
The June crack is higher at -$2.20 / bbl.
Gasoline
Asia’s gasoline crack discount to Brent narrowed to 49 cents versus $1.10 on the previous day.
Gasoline stocks held in ARA refining and storage hub fell 6.2% to 1.3 million tonnes in the week to Thursday, but these were still 55% higher versus a year ago at 840,000 tonnes.
The June crack is higher at -$0.50 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10 ppm gasoil were at 41 cents per barrel to Singapore quotes, 9 cents lower than Thursday.
The gasoil EFS, which determines the gasoil price spread between Singapore and Northwest Europe , was around minus $6 per tonne on Friday. Arbitrage is usually profitable when the EFS trades at about minus $15 a tonne or below, though it depends on other factors such as freight rates as well.
Cash discounts for jet fuel narrowed to 77 cents a barrel to Singapore quotes, compared with 83 cents per barrel a day earlier.
Gasoil stocks held in ARA rose 1.3% to 2.6 million tonnes in the week to May 28. ARA jet fuel inventories climbed 7.7% to 910 KT. Compared with a year earlier, jet fuel stocks were 21% higher, while gasoil inventories dropped 7%.
The June crack for 500 ppm Gasoil is higher at $1.65 /bbl with the 10 ppm crack at $ 4.15 / bbl. The regrade is at -$ 1.65 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 0.5% VLSFO crack to Brent crude fell to a record low of $3.31 a barrel above Brent crude, its lowest since record began in July.
Residual fuel inventories in the ARA edged higher towards a record high, reaching 1.745 million tonnes in the week to May 7 as storage utilization rose to 87% of capacity. Compared with last year, ARA fuel oil inventories were 54% higher and were well above the five-year seasonal average of 1.164 million tonnes.
The June crack for 180 cst FO is higher at – $3.65 /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.