Oil prices rose more than 1 percent on Thursday in volatile trade, drawing support from signs that Saudi Arabia is cutting crude output but pressured by concerns that slowing global economic growth could dent demand. Brent crude futures gained $1.04 to settle at $55.95 a barrel. WTI crude futures rose 55 cents to settle at $47.09 a barrel.
Prices once again traded in a wide range, with Brent hitting a session high of $56.30 a barrel and a low of $53.93 a barrel. WTI posted a session high of $47.49 a barrel and a low of $45.35 a barrel.
Supporting futures were signs of reduced supply from members of the OPEC. OPEC oil supply fell in December by the largest amount in almost two years, a Reuters survey found, as top exporter Saudi Arabia made an early start to a supply-limiting accord while Iran and Libya posted involuntary declines.
Libya’s oil exports have been suspended as bad weather conditions forced it to shut all its export terminals according to a shipping agent and a Libyan oil source. The Sharara oilfield will be losing up to 11kbpd when production restarts because of damage to the facility according to NOC.
OPEC crude cargoes leaving for the United States in Dec’18 dropped to the lowest level in at least five years.
But oil price gains were capped by concerns about a faltering global economy. Tech giant Apple Inc cut its sales forecast, citing a slowdown in China. The news rattled U.S. equity markets and weighed on oil prices, which at times track Wall Street. Weaker-than-expected U.S. factory data also added to economic worries. U.S. ISM manufacturing activity index fell to 54.1 in Dec’18 vs 59.3 in Nov’18, the biggest drop since Oct’08.
Crude inventories fell by 4.5 million barrels in the week ended Dec. 28 to 443.7 million, compared with analysts’ expectations for a decrease of 3.1 million barrels. This could be a realignment with DOE stock figures of around 441 million barrels.
Both product inventories recorded significant gains. Gasoline stocks rose by 8 million barrels, compared with analysts’ expectations in a Reuters poll for a 2 million-barrel gain. Distillate fuels stockpiles rose by 4 million barrels, compared with expectations for a 1.6 million-barrel gain.
Asia’s naphtha crack plunged 18.5 percent to a 3-1/2 week low of $40.88 a tonne on muted demand..
The January crack has sunk further to -$ 3.75 /bbl
Asia’s gasoline crack tripled on Thursday to a four-session high of $1.15 a barrel, reflecting strength in U.S. gasoline futures. Lower Chinese exports expected for January compared with December was also a factor.
The January crack has jumped back to $ 2.20 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash discounts for 10ppm gasoil slimmed to 62 cents a barrel to Singapore quotes on Thursday as the prompt-month time spread narrowed. The discounts were at 73 cents a barrel on Wednesday.
Asia’s cash differentials for jet fuel weakened for the fourth straight session on Thursday, taking discounts to their widest levels for this time of year in ten years. Surging supplies offset support from the region’s robust aviation sector. Cash discounts for jet fuel were at $1.32 a barrel to Singapore quotes on Thursday, levels not seen since August 2015. The differentials for the aviation fuel, which were at a discount of $1.30 a barrel on Wednesday, are seasonally at their weakest since 2009.
The current weakness in the jet fuel market is also due to subdued demand for kerosene this winter. The usual seasonal surge in kerosene heating demand, especially from Japan, has been relatively subdued so far this season, while the country is also expected to experience average-to-warmer weather between January and March this year.
The January crack has jumped to $ 12.15 /bbl with the 10 ppm crack at $ 13.10 /bbl. The regrade is lower at $ 1.95 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s 380-cst high-sulphur fuel oil (HSFO) cash premium extended gains to a more-than-two-week high on Thursday amid stronger buying interest and higher deal values for physical cargoes of the fuel in the Singapore trading window.
The 380-cst fuel oil cash premiums rose to $4.31 a tonne to Singapore quotes, up from $4.14 a tonne in the previous session and its highest since Dec. 14. High-sulphur fuel oil (HSFO) volumes traded in S&P Global Platts’ Singapore price assessment process were nearly halved in 2018 from the previous year, signs of a market shift ahead of tougher global marine fuel rules coming in 2020.
The January 180 cst crack has strengthened to -$ 0.05 / bbl with the visco spread at $ 0.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
The volatility in crude prices appears to be making cracks equally volatile. We shall use this volatility to lock in good levels for hedging if they arise.
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.