Crude Oil
Oil prices fell 1% on Tuesday, the last trading day of the teen years as thin trade for the year end amplified market moves. Brent crude fell 67 cents to settle at $66.00 a barrel. WTI crude fell 62 cents to settle at $61.06 a barrel.
Price notched the biggest annual gain in three years, supported by a thaw in the prolonged U.S.-China trade war and ongoing supply cuts from major oil producers. Brent gained about 23% in 2019 and WTI rose 34%.
Forecasters do not expect oil prices to move sharply in either direction this year. Brent crude is expected to hover around $63 a barrel, a Reuters poll showed on Tuesday, down modestly from current levels, as OPEC production cuts offset weaker demand. Over the past year, increased U.S. oil output offset the supply reductions undertaken by OPEC+ group and the effect of U.S. sanctions on Venezuela and Iran.
U.S. crude oil production in October rose to a record of 12.66 million barrels per day (bpd) from a revised 12.48 million bpd in September, the U.S. government said in a monthly report. The pace of growth is expected to slow in 2020.
Lackluster demand, including in developed economies, remains a primary concern headed into 2020.
U.S. President Donald Trump said the Phase 1 trade deal with China would be signed on Jan. 15 at the White House.
Investors were nervous about the Middle East, where thousands of protesters and militia fighters gathered outside the U.S. embassy in Baghdad to condemn U.S. air strikes against Iraqi militias. Security guards inside the U.S. embassy fired stun grenades at protesters. The U.S. ambassador and staff were evacuated due to security concerns.
China has raised the volumes of its first batch of 2020 fuel export quotas by 53% from a year earlier to 27.99 million tonnes.
China’s central bank said on Wednesday it was cutting the amount of cash that all banks must hold as reserves, releasing around 800 billion yuan ($114.91 billion) in funds to shore up the slowing economy.
Naphtha
Asia’s naphtha crack on Tuesday ended the year at a two-session high of $89.75 a tonne. This brought the average for 2019 to $49 a tonne, lowest the since Reuters started tracking the data in April 2008.
If not for the attacks on Saudi oilfields in September which had severely tightened supplies, Asia’s naphtha average crack value could have been worse off this year due to ample cargoes and heavy naphtha cracker maintenance as well as outages which had choked off demand. At present, naphtha supplies are still comparatively tight although not at the same intensity as immediately after the attacks.
India’s BPCL sold 35 KT of naphtha on late Monday for Jan. 7-8 loading to a European trader at premiums of about $35 a tonne to its own price formula on an FOB basis. This was down by at least 18% compared to a cargo the refiner had sold for Dec. 27-28 loading from the same port, but nearly 7 times more versus the average premium it had received for two September cargoes.
There are fewer naphtha crackers going into planned maintenance in 2020 versus 2019.
The January crack is lower at – $ 3.95 / bbl.
Gasoline
No fresh news on the gasoline markets.
The January crack is lower at $ 6.35 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil were at 77 cents per barrel over Singapore quotes on Tuesday, compared with 85 cents per barrel on Monday.
The January/February time spread for 10 ppm gasoil widened its backwardated structure by 2 cents to trade at a premium of 72 cents per barrel on Tuesday.
Cash premiums for jet fuel rose to 26 cents per barrel to Singapore quotes on Tuesday, compared with a 20-cent premium on Monday.
The January crack for 500 ppm Gasoil is lower at $ 15.10 /bbl with the 10 ppm crack at $ 15.90 / bbl. The regrade is at -$ 0.45 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 0.5% very low-sulphur fuel oil (VLSFO) crack slipped on Tuesday, but stayed within close sight of a record high touched in the previous session, as the market remained well supported by steady demand ahead of the new sulphur cap on marine fuels effective from Wednesday. Shippers seem to be favouring VLSFO mixes over distillate fuels ahead of the implementation of IMO rules.
The price differential between VLSFO and marine gasoil has narrowed sharply at various major port locations around the world in recent weeks.
The front-month VLSFO crack dipped to $28.44 per barrel above Brent crude during Asian trading hours on Monday, compared with a record high of $29.04 per barrel on Tuesday.
Meanwhile, the 380-cst barge crack to Brent crude for January narrowed its discount to minus $26.88 per barrel on Tuesday, from minus $26.90 on Monday. The 380-cst HSFO crack has averaged minus $13.54 per barrel this year, compared with an average of minus $9.74 per barrel in 2018, Refinitiv Eikon data showed.
Asia’s cash premium for 380-cst HSFO inched up to $18.35 per tonne to Singapore quotes on Tuesday, compared with $18.01 per tonne on Monday. The cash premium for 180-cst HSFO also rose to $12.84 per tonne to Singapore quotes on Tuesday, up from $12.42 per tonne on Monday.
The January 180 cst crack is steady at -$ 19.85 / bbl with the visco spread at $ 1.20 /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 refiner.
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.