Crude Oil
Oil prices fell on Friday and were on track for a fourth straight weekly loss on mounting worries about economic damage from the coronavirus. Brent crude futures fell 13 cents to settle at $58.16 a barrel. WTI crude futures fell 58 cents to settle at $51.56 a barrel.
For the week, Brent lost 4% while WTI lost 4.8%
Global equity markets were poised for their first monthly loss since August and Wall Street’s main averages tumbled more than 1% on Friday, as mixed corporate earnings added to worries over the impact of the coronavirus.
Disruptions in supply chains and travel curbs prompted economists to temper growth expectations for China, the world’s second-largest economy. Many companies in China planned to return to work on Friday after a week-long celebration of the Lunar New Year holiday, but authorities ordered businesses in many areas to stay shut longer to contain the disease.
China’s factory activity expanded at its slowest pace in five months in Jan’20, even as an outbreak of a new virus added to risks facing the world’s second-largest economy, with the Caixin/Markit Manufacturing PMI easing to 51.1 from 51.5 in Dec’19.
Japan’s manufacturing activity shrank for a 9th month in Jan’20 as output and new orders contracted again, pointing to further strains on the economy, with the Jibun Bank Final Japan Manufacturing PMI edging up to a seasonally-adjusted 48.8 from Dec’19’s final 48.4 reading.
U.S. crude production climbed 203 kbpd to a record 12.9 million bpd in November, the U.S. EIA.
US energy firms reduced the number of oil rigs operating for the first time in three weeks, cutting 1 rig to total 675 (-172 YoY) as producers follow through on plans to slash spending on new drilling for a second consecutive year in 2020, according to Baker Hughes.
Hedge funds and other money managers cut bullish bets on US crude futures and options in the latest week, the US CFTC said on Friday. The speculator group cut its combined futures and options position in New York and London by 56,317 contracts to 218,030 during the week.
Naphtha
Most of the Asian naphtha crackers which have cut runs by an average of 5%-10% have no plans on restoring their throughput.
The February crack is weaker at – $ 2.00 / bbl.
Gasoline
Asia’s gasoline crack rose for the third day on Friday to hit a 2-1/2 week high of $5.20 a barrel, supported by run cuts made in gasoline-producing units in North Asia.
Refiners in North Asia such as South Korea and Taiwan are cashing in on strong margins for VLSFO and are selling the fuel instead of using it as raw to make petrol via RFCCs. The profit-margins for VLSFO are currently at least 4 times higher than for gasoline.
The February crack is higher at 7.00/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil in Singapore rose to 28 cents per barrel to Singapore quotes on Friday, up from 12 cents per barrel on Thursday.
Cash premiums for jet fuel were at 31 cents per barrel over Singapore quotes on Friday, compared with a 29-cents premium a day earlier.
Asian refining margins for jet fuel dropped on Friday, posting their fourth straight weekly decline, as aviation demand weakened following the coronavirus epidemic.
The February crack for 500 ppm Gasoil has risen to $10.95 /bbl with the 10 ppm crack at $ 11.60 / bbl. The regrade is at -$ 1.50 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 0.5% VLSFO front-month crack fell on Friday due to firmer crude prices.
Trade liquidity in Asia’s physical and derivatives market for fuel oil remained persistently thin amid Lunar New Year holidays in China which were extended to Feb. 2 in an effort to contain the spread of the corona virus.
The front-month VLSFO crack rose to $21.97 per barrel above Brent crude, compared with $23.06 a barrel in the previous session.
The February 180 cst crack has dropped to -$ 10.50 / bbl with the visco spread at $ 1.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for today. Jet consumers may however examine the possibility of putting in place hedges either off crude or off the flat price in jet especially in 2Q 2020.
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.