Crude Oil
Oil prices declined on Friday but had done enough during the week to ensure a second consecutive weekly rise. The Brent November future, which becomes front month today, declined 38 cents to settle at $77.64/bbl. WTI settled 45 cents lower at $69.80 /bbl.
For the week Brent gained 2.1% while WTI gained 1.6%. Prices also showed a monthly gain after two consecutive declines of 4.3% and 1.5% for Brent and WTI respectively.
Fears of oversupply at the start of the month have been overshadowed by the visibly dropping exports from Iran and its impact on global oil inventories.
US trade war with China, and its impact on global economy will also be another factor which will be closely watched by markets.
A third aspect which will be considered is the impact of rising prices on consumption and demand destruction.
Meanwhile, Baker Hughes reported an increase of 2 oil rigs in their weekly report.
US markets will be closed for the Memorial Day Holiday today. As a result, the weekly stock reports from the US will be delayed by one day.
Brent continued to gain in strength breaking more resistances as it approached the swing high of $79.51 achieved in July. The weekly charts posted another strong green candle. The monthly chart has given a green candle after two months. Which begs the question : “How long can this sustain?” And “How high can this go?”
To examine sustenance, we have to look at oscilators which have now entered overbought levels in all charts. Moreover, they seem to be suggesting bearish divergences. These would suggest treading with caution.
Trading Strategy
Last week we had recommended staying on the sidelines and going short near $76.50 with a stop above $ 78.00. For those who wished to stay long, we had recommended a trailing stop around $ 75.00.
The longs have gained handsomely from their positions. Those who are short are perilously close to the stop loss level suggested.
For now though, we would recommend staying short and even recommend adding to shorts above $ 78.50 with a stop above $ 79.00 targeting $75.25 first and then $ 74.50.
Supports and Resistances
There don’t seem to be any serious supports before $ 76.25-76.00. The next support is the 100 DMA around $75.25 followed by the 50 DMA which is at $ 74.65.
Resistances appear to be in $78.00 – $78.25 area, then in the $ 79.25-79.50 area followed by last big high of $ 80.50.
For bigger charts visit our Technical Views page.
Naphtha
Asia’s naphtha crack rose for the fourth day on Friday to reach near a two-week high of $100.78 a tonne after being lifted by a flurry of spot and term purchases this week.
The September crack has slipped to -$ 0.30 /bbl
Gasoline
Asia’s gasoline crack was similarly near a two-week high of $8.77 a barrel as supplies fell across regions. ARA Gasoline stocks eased 1.9 percent to 757,000 tonnes, the lowest since Nov. 10, 2016. Naphtha stocks were near a four-month low of 251,000 tonnes.
The September crack is higher at $ 9.90 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asian refining margins for jet fuel slipped for a third session straight on Friday as concerns of ample prompt supplies continued to weigh on sentiment.
The contango structure of the front-month time spread for jet fuel was at its widest in over two weeks at minus 10 cents a barrel from minus 6 cents in the previous session.
Gasoil Inventories in ARA slipped 6 percent to a five-week low of 2.441 million tonnes in for the week ended Aug. 30. Meanwhile, jet fuel inventories rose 5 percent to a three-week high of 647,000 tonnes. Compared with year-ago levels, gasoil inventories were 11 percent lower, while jet fuel stocks were 15 percent higher.
The September crack is higher at $ 15.80 / bbl with the 10 ppm crack at $ 16.60 /bbl. The regrade is lower at – $ 0.35 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst barge crack edged lower on Friday, increasing its discount to Brent crude to its widest in three months. The September 380-cst barge crack to Brent crude slipped to about minua $10.69 a barrel, down from minus $10.48 a barrel on Thursday and its widest discount since May 31.
ARA onshore fuel oil inventories 78 KT to a near four-month low of 1.028 million tonnes in the week ended Aug 30. Exports of fuel oil from the ARA region were headed to the Middle East Gulf and the Mediterranean.
The September180 cst crack is lower at -$ 4.15 / bbl with the visco spread at $ 1.10 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
This section will be updated later today.
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.