Crude Oil
Oil prices strengthened Thursday, with U.S. crude gaining nearly 2 percent after markets saw an industry report suggesting domestic crude stockpiles would soon decline again after a surprise rise in the latest week. Brent crude futures rose $1.06 to settle at $73.45 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose $1.30 to settle at $68.66 a barrel..
Prices started rising on a Genscape report stating that stocks at Cushing had dropped 1.1 million barrels.
The US Trump administration has proposed to ease US fuel economy standards at a fleet average of 37 million per gallon starting in 2020. This compares to what would have been an increase to 47mpg by 2025 under the Obama plan. This will have the impact of increasing gasoline consumption and reducing the cost of vehicles as the costs required to make them fuel efficient will reduce.
On the other hand, India is mulling methanol-blended petrol vehicles, as part of efforts to make an annual reduction of $100 billion in crude imports by 2030
Naphtha
Asia’s naphtha physical crack recovered from a one-week low on Thursday to reach a two-session high of $119.05 a tonne, with South Korea buying fuel for second-half September delivery. LG Chem was among the first to issue a purchase tender and bought naphtha for Yeosu and Daesan arrival.
The balance August crack is lower $ 1.05 /bbl.
Gasoline
Similar to naphtha, Asia’s gasoline crack recovered from a 1-1/2 week low to a two-session high of $7.69 a barrel but fundamentals were weak as the market was saddled with high stockpiles.
Singapore’s onshore light distillates stocks, which comprise mostly gasoline and blending components for petrol, for instance were over a four-month high of 15.33 million barrels in the week to Aug. 1.
The balance August crack has dropped to $ 8.75 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for 10ppm gasoil climbed on Thursday as middle distillate inventories in Singapore dipped, but markets were concerned near-term demand may not be sufficient to meet growing supplies in the region.
Backed by a stronger bid, cash premiums for gasoil with 10ppm sulphur content rose to 8 cents a barrel to Singapore quotes, against a premium of 5 cents on Wednesday. Gasoil exports from China and India will remain vital for the wider Asian markets over the next couple of months as Chinese refineries returning from planned turnarounds add to supply, while India will likely experience a seasonal dip in domestic sales during the monsoon.
India used about 42.6 million tonnes of diesel during January to June this year, up more than 6 percent from the corresponding period last year. However, the country’s consumption of the transportation fuel usually drops as travel is affected by heavy monsoon rains. India’s diesel exports in June were up 20 percent from the same month last year, and 23 percent higher than May.
This follows reports that China’s June diesel exports that were up 23 percent from a year ago.
Meanwhile, cash premiums for jet fuel were at 12 cents a barrel to Singapore quotes, up from 11 cents a barrel on Wednesday.
Singapore onshore middle distillate stocks dipped about 9 percent in the week to Aug. 1 to 9.94 million barrels.
The balance August crack has improved to $ 13.70 / bbl with the 10 ppm crack at $ 14.60 /bbl. The regrade has increased to $ 0.70 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 380-cst prompt time spread was steady on Thursday, hovering near a three-year high hit earlier in the week, as near-term fundamentals remained supportive.
This followed official data showing Singapore fuel oil stocks drop to a nine-year low this week. Bullish fundamentals propped up Asia’s fuel oil market over the summer months as strong demand, particularly in the Middle East, and lower output contributed to low arbitrage volumes into the Singapore hub.
However, some in the market are expecting supplies into Singapore to gradually normalize from September onwards as utility demand subsides after the scorching summer.
Cash premiums for 380-cst cargoes were also lower on Thursday as some suppliers lowered their offers for cargoes of the fuel in comparison with the previous session.
Singapore’s weekly onshore fuel oil inventories continued to shrink after falling 1.397 million barrels to 14.799 million barrels in the week ended Aug. 1. Residual fuel stocks are now at their lowest since July 2009 after falling 8.6 percent in the week ended Aug. 1. The shrinking fuel oil stocks in Singapore came as no surprise due to months of below-average arbitrage resupplies into Singapore as cargoes were diverted to the Middle East to meet strong seasonal demand.
The balance August 180 cst crack is waeker at -$ 0.45 / bbl with the visco spread at $ 1.10 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The 2Q19 position in Naphtha has improved a bit.
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.