Oil prices fell to their lowest in more than a year on Monday as the coronavirus outbreak curtailed Chinese demand. The new Brent crude front month contract fell $2.17 to settle at $54.45 a barrel. WTI crude futures fell $1.45 to settle at $50.12 a barrel.
WTI briefly breached $50 /bbl, touching a session low of $49.91, also the lowest since January 2019. The U.S. crude’s discount to Brent narrowed to as little as $4.32 a barrel, the least since September. Brent was seen trading in contango yesterday.
Iranian Oil Minister Bijan Zanganeh said the oil market is under pressure with prices dropping below $60 a barrel, and “efforts must be made to balance it.”. OPEC and its allies are considering cutting their oil output by a further 500 KB/D due to the impact on oil demand from the coronavirus, and are considering holding a ministerial meeting on 14-15 Feb’20, earlier than a current schedule for a meeting in Mar’20.
The death toll from a coronavirus outbreak in China rose to 425 as of the end of Monday (+64 DoD), the country’s National Health Commission said on Tuesday. Across China, the total number of confirmed infections was 20,438 (+3,235 DoD).
China’s Sinopec, Asia’s largest refiner, is cutting throughput this month by around 12% or 600 KB/D in a steepest cut in over a decade, as the rapidly spreading coronavirus hits fuel demand and distribution, four people with knowledge of the matter said on Monday.
On the first day of trade in China since the Lunar New Year holiday, investors erased $393 billion from the nation’s benchmark equities index, sold the yuan currency and dumped commodities as coronavirus fears dominated markets.
Asia’s naphtha crack settled at below $80 per tonne yesterday. This was at its lowest since Jan. 28.
The February crack is stronger at – $ 1.60 / bbl.
Asia’s gasoline crack rose for a fourth straight day on Monday to a near two-month high of $6.73 per barrel as Chinese refineries cut runs in view of faltering demand.
Most parts of Asia were also grappling to contain the virus, which has claimed its first fatality outside of China following the death of a Chinese man in the Philippines.
Chinese refinery run cuts come at a time when South Korea and Taiwan have trimmed gasoline output from secondary units even before the start of the coronavirus as it was more lucrative to sell VLSFO instead of using it to make petrol.
The February crack is higher at 7.70/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash premiums for 10 ppm gasoil in Singapore rose 20 cents to 48 cents per barrel to Singapore quotes on Monday, backed by firmer deals in the Singapore trade window.
Cash premiums for jet fuel slipped to 16 cents per barrel over Singapore quotes on Monday, compared with a premium of 31 cents per barrel on Friday.
Cracks for jet fuel dropped to $8.64 per barrel over Dubai crude during Asian trading hours on Monday, a level not seen since April 2016. The cracks were at $9.61 per barrel on Friday.
The February crack for 500 ppm Gasoil has risen to $11.30 /bbl with the 10 ppm crack at $ 11.95 / bbl. The regrade is at -$ 2.35 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Premiums for delivered 0.5% VLSFO continued to ease from last month’s record high on Monday.
Key independent refineries in east China’s Shandong province known sometimes as “teapots”, which collectively make up a fifth of China’s oil imports, have slashed operations by 30-50% to below half of their capacity, a level unseen since at least 2015.
Shipping companies may face delivery delays of vessels fitted with scrubbers due to the impact from the virus outbreak in China.
The February 180 cst crack has dropped to -$ 10.90 / bbl with the visco spread at $ 1.15 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
No fresh action for today. We are cautiously going to enter a hedge for jet consumers in 2Q 2020 vis a vis 10 ppm gasoil at -$1.45 /bbl. The absymally low levels have been triggered by the coronavirus. We are hoping that it will be contained over the next two months and the regrade returns to more normal levels.
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.