Crude Oil
Oil ended slightly higher on Wednesday but remained below the session’s early highs above $40 a barrel, as doubts emerged about the timing and scale of a potential extension to the pact between OPEC and its allies to cut crude supplies.
Brent futures rose 22 cent to settle at $39.79 a barrel. U.S. crude rose 48 cents to settle at $37.29 a barrel.
Oil prices were supported by a drawdown in U.S. crude inventories in the latest week, but came under pressure as U.S. refined product inventories surged on tepid demand.
OPEC leader Saudi Arabia and non-OPEC Russia have agreed a preliminary deal to extend existing record oil output cuts by one month while raising pressure on countries with poor compliance to deepen their cuts, OPEC+ sources told Reuters.
OPEC+ is wary of helping US shale oil recover, with the rally in oil prices above $40/bbl from below $20/bbl. A Russian source familiar with OPEC+ talks on the issue said OPEC+ is seeking $40-$50/bbl oil for now.
The Trump administration on Wednesday barred Chinese passenger carriers from flying to the US starting on 16 Jun’20 as it pressures Beijing to let US air carriers resume flights amid simmering tensions between the world’s two largest economies.
DOE data
U.S. crude inventories fell by 2.1 million barrels in the week to May 29, data from the US EIA showed. Refining runs increased to 71.8% as more refiners prepared for return to normalcy.
Nevertheless, the demand for gasoline remained sluggish at 7.55 mb/d and demand for distillates dropped to serious lows 2.72 mb/d. At 174.2 million barrels, distillate stocks are at the highest levels seen for the past 10 years or more.
Our Material Balance sheet continues to remain skewed with data suggesting that crude stocks should have been drawn more than reported.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 386,788 (+4,929 DoD) yesterday, with the total number of confirmed infections at 6,562,695 (+121,413 DoD). (Click here for details).
Naphtha
Asia’s naphtha crack hit a fresh five-week high of $48.53 a tonne on Wednesday, lifted by strong demand.
The June crack is lower at -$2.05 / bbl.
The July crack is at -$1.70 / bbl.
Gasoline
Asia’s gasoline crack was at 37 cents a barrel premium to Brent versus at a discount of $1.55 a barrel the previous day.
The June crack has jumped further to $0.90 /bbl.
The July crack is at $1.50 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for jet fuel were at 25 cents a barrel to Singapore quotes on Wednesday, compared with 24 cents a day earlier.
The June/July time spread widened by 8 cents to trade at a discount of 40 cents a barrel on Wednesday.
Global air passenger demand has started to recover slightly in May’20 after plummeting to a record low in Apr’20 when it fell 94.3% YoY, due to coronavirus-related travel restrictions, the IATA said 3 Jun’20
Cash discounts for 10 ppm gasoil were at 35 cents per barrel to Singapore quotes on Wednesday as against a discount 36 cents on Tuesday.
Middle-distillate inventories in the Fujairah Oil Industry Zone rose 2.2% to a record 5.997 million barrels in the week to June 1, data via S&P Global Platts showed. The weekly stocks in Fujairah have averaged 3.7 million barrels so far in 2020, compared with a weekly average of 2.4 million barrels in 2019.
The June crack for 500 ppm Gasoil is lower at $1.20 /bbl with the 10 ppm crack at $ 3.70 / bbl. The regrade is at -$ 1.40 /bbl.
The July crack for 500 ppm Gasoil is at $3.10 /bbl with the 10 ppm crack at $ 3.95 / bbl. The regrade is at -$ 2.65 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 380-cst HSFO cash discount for cargoes of the fuel was at minus $9.34 a tonne to Singapore quotes, up from minus $9.50 a tonne in the previous session.
Despite being the primary marine fuel, buying interest for cargoes of 0.5% VLSFO in the window has dried up in recent weeks with the last reported trade on May 18.
By comparison, trading activity for HSFO cargoes has remained relatively active, with 120 KT of the fuel exchanging hands since May 18.
Oil product inventories in the United Arab Emirates’ Fujairah bunkering and oil hub in the Middle East jumped to record highs in the week to June 1. Fujairah’s overall oil product inventories climbed to 30.71 million barrels in the week to June 1, above the previous record of 30.262 million barrels in the week to May 18, and marked the third record high in the last four weeks.
The June crack for 180 cst FO has jumped to – $1.95 /bbl with the visco spread at $1.45 /bbl.
The July crack for 180 cst FO is at – $0.90 /bbl with the visco spread at $1.30 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for 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 refinery.
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.