Crude Oil
The prospect of higher OPEC supplies continued to worry the markets as oil prices dipped on the last day of the week. Brent crude futures dropped 80 cents to settle at $76.79 /bbl. U.S. West Texas Intermediate (WTI) crude futures fell by $ 1.23 to settle at $65.81 /bbl, their lowest finish since April 10.
For the week Brent crude gained 0.4%. WTI however, lost 3% in addition to the 5% it lost in the week prior to this one.
Brent’s premium over WTI futures remained near three-year highs above $10 a barrel, having surpassed $11 on Thursday. The premium has doubled in less than a month, as a lack of pipeline capacity in the United States has trapped a lot of output inland.
Two more rigs were pressed into service in the US raising the count to 861, the highest level since March, 2015.
A statement issued by the meeting of Saudi Arabia, UAE, Oman, Kuwait and Algerian oil minsters said the ministers “stressed the need to maintain the existing cooperation and continue the successful endeavour carried out by the participating countries”. They also “emphasised the need for healthy market conditions that stimulate adequate investments in the energy sector, in order to ensure stable oil supplies are made available in a timely manner to meet growing demand and offset declines in some parts of the world,”
Due to travel pressures, we are presenting a quick technical picture for this week here. A more detailed picture will be available later in the day at our Technical Views Page
The Brent technical charts are interestingly poised. While the daily chart shows a drop on the last day, we see bullish divergences there. And while the weekly chart shows an green bar, we see bearish divergence there.
Trading Strategy
Last week, we had expected prices to drop to the $ 73-75 area before pulling back to the $77-79 area. While prices did not drop much allowing traders to take good long positions the pullback would have allowed traders to go short with good results. For now, we would recommend holding existing positions and adding more above $ 77.50 to target $ 70 /bbl. Stops would be ideally above $ 80.50.
Supports and Resistances
Supports for now appear around $ 75.50 with stronger support in the $ 74.50 area and then around $ 71.20. Resistances would appear at $ 77.50 and $ 78.80 below $ 80.
Naphtha
Asia’s naphtha crack for second-half July hit $89.38 a tonne, making this the lowest front-month value since May 3 as weak gasoline fundamentals weighed.
The balance June crack is lower at -$ 1.45 / bbl
Gasoline
Asia’s gasoline crack fell for a seventh straight session on Friday to $7.80 a barrel, lowest since May 15 under pressure from rising supplies and high oil prices..
The June crack has dropped to $ 10.05 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for jet fuel dropped on Friday to the lowest in over four months on prospects of increasing supply. Cash differentials for jet fuel slipped to 2 cents a barrel to Singapore quotes, down from 7 cents a barrel on Thursday.
A slowdown in global air passenger demand growth in April as well as return of refineries from turnarounds weighed on sentiment.
Meanwhile, cash differentials for gasoil with 10 ppm sulphur content dipped to 29 cents a barrel to Singapore quotes on Friday, compared with 35 cents on Thursday.
The balance June crack has crashed to $ 13.85 / bbl with the 10 ppm crack at $ 14.70 /bbl. The regrade has improved to $ 0.45 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s fuel oil market continued to gain support from lower arbitrage inflows and shortages of finished grade bunker fuels. Strong buying interest for 180-cst fuel oil cargoes on Friday pushed cash premium of the fuel to its highest since May 2017, while the prompt-month 380-cst time spread held at a more than eight-month high of $4 per tonne reached on Thursday.
Cash premiums of the 380-cst fuel oil as well as the front-month time-spreads, arbitrage spreads and cracks all ended the week higher. A lack of cutter stocks used for blending fuel oil into finished grade bunker fuels has dogged the Singapore fuel oil trading hub market since the end of April, pushing premiums higher.
The balance June 180 cst crack is higher at -$ 3.40 / bbl. The visco spread has widened to $ 1.80 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The calendar 19 prices have now clearly eased out as we close our position for 10 ppm gasoil today. Hedgers are recommended to hold the position. We are merely taking it off our tracker.
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.