Oil prices slumped for a sixth day in a row on Friday to their lowest in more than a year as fears about the corona virus continued. The expiring April Brent future fell $ 1.66 to settle at $50.52 a barrel. The more active May Brent future settled $ 2.06 lower at $ 49.67 a barrel. WTI crude futures settled $ 2.33 lower at $44.76 a barrel.
For the week, Brent lost almost 14%, its biggest weekly percentage decline since January 2016, while WTI fell over 16% in its biggest weekly percentage drop since December 2008.
The coronavirus spread further, with cases reported for the first time in six countries across three continents, battering markets and leading the World Health Organization (WHO) to raise its impact risk alert to “very high.”
At a global level, the death toll from the COVID-19 in rose to 2978 (+120 over the weekend) yesterday, with the total number of confirmed infections at 86991 (+5697 over the weekend). The growth factor of new cases increased to 1.32 from 1.35 on Wednesday. (Click here for details). In terms of implications, there is still doubt about the containment of the virus outbreak. However, the fatalities are much lower.
Brent crude’s slump should focus minds on next week’s meeting of the OPEC+ group. OPEC could agree on deeper oil supply cuts as they meet this week on the 5-6 Mar’20, with or without Russia’s support, to halt the slide in crude prices triggered by the global spread of the coronavirus, said two sources familiar with the talks.
The US DOE said on Friday it will sell up to 12 MB of oil from the SPR in compliance with the 2015 budget act. The US President’s 2021 budget proposed a sale of another 15 MB from the reserve to help pay for projects overseen by the Energy Department.
China’s factories were dealt a devastating blow in Feb’20, with the Caixin/Markit Manufacturing PMI tumbling to 40.3 in Feb’20, the lowest level since the survey began in 2004, as the coronavirus epidemic paralysed large parts of the economy.
US energy firms reduced the number of oil rigs operating for the first time in 4 weeks, cutting 1 oil rig to total 678 (-165 YoY), as some companies expect output growth from shale formations to slow as producers cut spending on new drilling for a second consecutive year.
Asia’s naphtha rebounded from a five-month low to reach a three-session high of $58.35 a tonne on Friday, as raw material costs fell and demand rose this week.
However, the naphtha crack has lost more than 42% of its value compared to its Jan. 14 peak.
The March crack has jumped to – $1.80 / bbl.
Asia’s gasoline crack extended losses to reach a 4-1/2 week low of $3.98 a barrel as the persistent, fast-spreading virus limited travel and overshadowed falling inventories across key regions.
ARA gasoline stocks 73 KT (16%), its second straight weekly fall, to reach a three-week low of 1.12 million tonnes in the week to Feb. 27.
The March crack is unchanged at $5.90 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash premiums for 10 ppm gasoil were at 27 cents per barrel to Singapore quotes on Friday, compared with a premium of 20 cents per barrel on Thursday.
Cash differentials for jet fuel were at a discount of 1 cent per barrel to Singapore quotes on Friday, against a discount of 7 cents on Thursday.
Gasoil stocks held at ARA dropped 6.1% to 2.1 million tonnes in the week to Feb. 27. Compared with a year earlier gasoil inventories dropped 12%.
The March crack for 500 ppm Gasoil continues to recover at $9.15 /bbl with the 10 ppm crack at $ 10.00/ bbl. The regrade is at -$ 1.30 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s front-month VLSFO crack to Brent crude rose to $9.87 a barrel on Friday. The front-month crack sank to $8.47 a barrel on Thursday, its lowest since Aug. 15 and was at $13.57 a barrel a week ago.
Fuel oil stocks in ARA rose 11% to a six-week high of 1.16 million tonnes in the week ended Thursday..
The March crack for 180 cst FO is higher at -$5.35 /bbl with the visco spread at $1.20 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
The 180 cst crack for 2Q20 has strengthened past -$7.50. We will lay on one more tranche of hedge at the current levels of -$ 7.25 as mentioned earlier.
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.