Oil prices eased slightly on Tuesday after rallying for three straight sessions, but remained close to four-year highs on worries that global supplies will drop due to Washington’s sanctions on Iran. Brent crude settled 18 cents lower at $84.80 a barrel. WTI crude futures settled 7 cents lower at $75.23 a barrel.
In addition to the worries about Iran, prices are being supported by global demand that has remained strong in the face of trade tensions. However, soaring crude prices and weak emerging market currencies may erode economic growth.
A Reuters survey of OPEC production found Iranian output in September fell by 100,000 barrels per day, while production from OPEC as a whole rose by 90,000 bpd from August.
The API reported a build of around 900 KB in crude stocks for the last week. This was lower than market expectations. Product stocks were drawn down. This was contrary to expectations for gasoline but lower than expected for distillates.
Asia’s naphtha crack eased 1.8 percent on Tuesday and hit a three-session low of $107.38 a tonne as oil prices at a four-year peak weighed on the market. Naphtha fundamentals had been stronger since last week. This was because cargoes arriving next month from the West, including Europe and the Mediterranean, were still seen at lower levels versus cargoes landing this month. Japan’s JXTG Nippon Oil & Energy Corp restarted its 540,000-tonnes-per-year Kawasaki cracker in late September after a scheduled maintenance that started on Aug. 11
The October crack is lower at -$ 1.00 /bbl
Asia’s gasoline crack collapsed to $ 7.70 /bbl yesterday in the absence of further buying interest.
The October crack is lower at $ 8.95 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash differentials for 10ppm gasoil climbed to rose to 84 cents a barrel to Singapore quotes during Asian trade on Tuesday, compared with a premium of 80 cents a barrel on Monday. This was the highest level in a week. The current high cash differentials for gasoil would likely sustain because the region is quite strong lately due to some turnarounds in North Asia.
The Oct/Nov time spread widened in backwardation to $1.45 a barrel on Tuesday, from $1.10 a barrel on Monday.
Cash discounts for jet fuel narrowed to 67 cents a barrel to Singapore quotes, compared with a discount of 70 cents on Monday. The physical market for jet fuel in the Singapore window remained subdued with no bids or deals on Tuesday
The October crack has improved further to $ 16.65 / bbl with the 10 ppm crack at $ 17.45 /bbl. The regrade is at multi month lows at -$ 1.70 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
The front-month barge 380-cst fuel oil crack slightly narrowed its discount to Brent crude on Tuesday despite crude oil prices climbing to their highest in nearly four years this week. The relatively strong fuel oil crack reflects market expectation of tighter fuel oil supplies over the near-term amid weak arbitrage economics, lower output and looming sanctions on Iranian oil exports early next month.
The November crack discount was at minus $11.64 a barrel to Brent crude on Tuesday, compared to minus $11.72 a barrel in the previous session.
The October 180 cst crack is higher at -$ 3.35 / bbl with the visco spread at $ 1.05 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Cal 19 distillate cracks seem to have receded a bit but are still extremely strong. Our October regrade buy for consumers seems like it would lose a lot of money. However, these are risks to hedging and as such, a hedger has to deem such risks as acceptable.
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.