2 Jun 2017

Crude Oil
Crude Oil prices failed to react particularly positively to what was definitely bullish data published by the DOE. Brent settled 14 cents lower at $ 50.63 /bbl. WTI reacted better, but not by much as it settled 4 cents higher at $ 48.36 /bbl
Yesterday’s DOE data reported strong draws in both crude and gasoline. However, such is the impact of market sentiment that the market failed to scale $ 51.50 / barrel before coming back to settle where it did.  Even this morning, the market is surprisingly lower.
DOE data
In its report yesterday, the DOE reported a draw of 6.4 million barrels in crude stocks as also a draw of 2.8 million barrels in gasoline. Distillates showed a build of 394 kb. What was perhaps not immediately obvious was that the SPR drew by about 1 million barrels.

Refinery runs increased 95.5% which is huge and gasoline demand too increased by 118 kbd.
Yet, we saw the markets  thumb the data down.  What could possibly be the reasons for this?
We have seen that US crude production has increased by over 500 kbpd since January and is still increasing.  We have also seen Libyan production increase by over 200 kbpd.  Nigerian production too is on the rise. Russia is talking of increasing production in early 2018.  Chinese imports are slowing down as their teapot refiners are reducing runs.

On the demand side, while you have seen demand growth week on week, the annual growth is marginally negative.  Even if you grant increased efficiency of vehicles, it means that stocks are going to remain surplus. Even today, stocks are higher than last year’s levels

Therefore, there do not appear to be prospects of an immediate rise in prices for now at least.

Naphtha

Naphtha cracks continue to increase on observed physical demand. The June Japan Naphtha- Dubai crack is valued at -$0.95 /bbl.

Gasoline

Gasoline also appear to be stronger. While the June 92 Ron-Dubai crack is unchanged at $11.7 /bbl., we are seeing increased backwardation in the flat price. Singapore stocks drew by more than 700 kb to reach their lowest level in six months

With Ramadan round the corner, it is not unreasonable to expect cracks to remain strong for this month. However, we would be watchful going ahead.

Distillates

Gasoil and Jet cracks weakened significantly in the face of ample supplies of both products.  Though Singapore distillate stocks dropped by 1.1 million barrels in the last week, they are still at extremely high levels.

The June crack is valued at $ 9.90. The regrade, is at $0.35 /bbl. While the regrade is at the same level it was yesterday, August and September levels have fallen by around 10 cents each.

Fuel Oil

Fuel Oil stocks drew by only 28 kb this week.  While this statement looks pretty innocent, stocks are currently at the lowest level in five years!

While a lot of stocks are reported to be in floating storage, we are yet to see them surface. The June 180 cst crack has jumped in value at -$ 2.2 / bbl. The visco spread is at $ 1.30 / 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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