Crude Oil
Oil prices rose about 3 percent on Friday on a slew of supportive factors. Brent crude oil futures gained $1.91 to settle at $62.75 a barrel, while WTI crude futures rose 1.47 cents to settle at $55.26 a barrel.
The first impetus was provided in the US morning with upbeat U.S. jobs data. Prices extended gains after weekly data showed U.S. drillers cut the number of oil rigs.
Prices climbed to session highs after U.S. energy firms cut the number of operating oil rigs for a fourth week in the past five, bringing the count to the lowest in eight months. Last week’s data showed the rig count had fallen by 18 rigs to 847.
Other factors supporting oil prices include the imposition of sanctions on Venezuela. President Trump has indicated that military force may even be used if necessary. Russia too has reportedly cut down its production in January from a record 11.5 million in December.
For the week, Brent gained 1.8% while WTI gained 2.9%
On the other side, the US-China trade imbroglio continue to act like a cloud on the prospects of increases in crude oil prices.China’s factory activity shrank by the most in almost three years in January, reinforcing fears about fuel demand in the world’s second largest economy.
Naphtha
Asia’s open specification naphtha intermonth premiums extended gains into a sixth session on Friday, supported by tight supplies and firm demand.
The second half March price was $11.25 a tonne higher than the second half April, making this the highest inter month premium in nearly eight months.
Spot premiums spiked in view of delays in cargo arrivals in Asia from the West due to bad weather. Cargoes are being traded at low teen premiums to CFG Japan quotes.
The February crack has, however, dropped to -$ 6.40 /bbl.
Gasoline
Asia’s gasoline crack was at a discount of $1.99 a barrel to Brent crude, as high supplies kept the levels mostly at discounts so far this year.
Gasoline stocks held independently at the storage and refining hub of Amsterdam Rotterdam Antwerp
Gasoline inventories in Singapore were also in abundance in the week ended Jan. 30 as they were just 2.8 percent below the record high levels.
ARA gasoline stocks edged up 1.7 percent to 1.375 millions tonnes in the week to Jan. 31. This was the highest since March 29, 2018 when inventories were at record levels.
The February crack has improved to -$ 1.30 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10ppm gasoil were at 35 cents a barrel to Singapore quotes on Friday, compared with a discount of 42 cents per barrel a day earlier.
Cash differentials for jet fuel narrowed to a discount of $1.36 a barrel to Singapore quotes on Friday, compared with Thursday’s discount of $1.42 a barrel. This is the narrowest level of discount in three weeks.
Demand for middle distillates is likely to be spurred due to scheduled maintenance of some regional refineries. A likely surge in air passenger travel during the Chinese New Year holidays is expected to boost aviation fuel demand.
The February/March time spread for the aviation fuel narrowed for the fourth consecutive session to a discount of 40 cents a barrel on Thursday, their slimmest in three weeks. They were at a discount of 57 cents on Wednesday.
ARA gasoil stocks rose by 143 KT from the previous week to 2.37 million tonnes in the week to Jan. 31.
The February crack has dropped to $ 12.45 /bbl with the 10 ppm crack at $13.40 /bbl. The regrade has dropped to $ 1.05 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Fuel oil cracks slipped in thin trade on Friday despite weaker crude oil prices, ahead of the Lunar New Year holidays next week. The prompt month 180 cst fuel oil crack to Dubai crude narrowed to a premium of 62 cents a barrel on Friday, down from a near two month high of plus $1.18 a barrel in the previous session. Similarly, the more actively traded prompt month 380 cst barge crack to Brent crude slipped to minus $3.92 a barrel, down from minus $3.43 a barrel on Thursday.
ARA fuel oil stocks fell by 356 KT to 946 KT in the week ended Jan. 31.
The February 180 cst crack has dropped to $ 0.40 / bbl with the visco spread at $ 0.30 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Fuel Oil cracks have eased marginally. ln the meanwhile, strong buying in Cal 20 cracks has pushed the Jet crack past $ 20 / bbl. We shall put on one more tranche of hedges at the current level of $ 20.05 /bbl
The Cal 20 distillate cracks have risen as well. We will hedge Jet at levels in excess of $ 20 /bbl.
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.