Crude Oil prices ended 2017 at year highs as an effect of the prolonged supply cut and various other events. The March Brent contract (which becomes front month today) settled 71 cents higher at $66.87 /bbl. WTI settled 58 cents higher at $ 60.42 /bbl, it’s highest settle in all of 2017 and its first settle above $ 60/bbl in a long time.
Oil prices ended the year with a 12% gain spurred by growing demand and repeated cuts to an already curtailed supply by both technical as well as geo political events. While this figure does not look impressive, we have to take into account a slump in prices in mid 2017 when Brent reached a low of $ 44.37 / bbl. From there on, it has climbed steeply and decisively to register a growth of over 50% for the 2nd half of the year. See the weekly chart below.
As prices rise, there are doubts on how much more US production can rise. Further, as prices rise, the hedges that have been put in place would be suffering heavy losses and the sustainability of such losses would bear on the existing companies as well.
On the bearish side, the Forties pipeline back on full capacity. The market would have been able to effectively see the impact of the blast on the Es Sider pipeline more clearly. The Baker Hughes rig count remained unchanged at 747 for the third week in a row.
Having said the above, the bulls have the bit firmly in their teeth and we would not be surprised to see a further rise before correction and or exit from the production cut process.
The charts continue to display strong bullishness. Having said that, simple oscillators like the RSI are in the heavily overbought region pointing towards a correction. In the daily charts, the RSI is showing a clear bearish divergence. This is conspicuous by its absence in the weekly charts.
Supports lie at $ 65.79, $ 64.09, and $ 63.39. Resistances are at $ 67.05 (previous high) and then $ 68.46 and $ 69.33.
We would recommend hedging long positions with puts or even put spreads like buying $ 65.00 put and selling $ 63.50 put.
Asia’s physical naphtha crack settled at a near three-week high of $125.30 /MT thereby making 2017’s average crack level higher versus 2016 but lower when compared to 2015.
Although most buyers have completed their purchases for first-half February 2018 cargoes, spot premiums are expected to stay firm in the wake in the near future.
The balance January naphtha crack is valued higher at $ 3.50 /bbl.
Akin to naphtha, the Asian gasoline crack also settled higher last Friday at $8.04 /bbl, a barrel, thereby making 2017’s average crack level higher versus 2016 but lower when compared to 2015.
Going forward, the key determinants that will have a bearing on the gasoline crack are rising exports from China and a push by several countries to use alternate fuels for vehicles.
The balance January 92 RON crack is valued lower at $ 10.85 /bbl.
In contrast with Light products, the physical Asian 500ppm gasoil crack fell on Friday amid concerns over increasing supplies in the first quarter of 2018. China’s increased allowances for 2018 oil product exports are further adding to this bearish oversupply sentiments.
The Gasoil crack for balance January is unchanged at $ 14.55 / bbl. today. The regrade also stays at $ 0.70 /bbl
The physical Asian fuel oil crack slid on Friday to settle lower for the seventh consecutive day. The sharp increase in crude oil prices coupled with increased flows into Singapore from northwest Europe have accentuated the bearish market sentiment.
In other news, Ocean Bunkering Services (OBS) Pte Ltd recently announced that it will add five bunker barges to its fleet as part of plans to expand its operations in Singapore, the world’s largest marine refueling market.
The balance January 180 cst crack is valued lower at -$ 4.30 /bbl today with the visco spread at $ 0.60 /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