Oil futures settled sharply lower on Friday, as declines in the U.S. ISM manufacturing index, which came on the heels of underwhelming Chinese factory activity, fed worries over a potential slowdown in energy demand. Brent crude futures gave up $ 1. 24 to settle at $65.07 a barrel. U.S. crude tumbled $1.42 to settle at $55.80 a barrel.
Despite hitting their highest levels since mid-November this week, Brent futures ended the week 3.3 percent lower and WTI dropped 2.7 percent.
The immediate cause for the retracement was poor ISM numbers from the US on the back of reduced factory activity in China reported on Thursday.
Global fuel consumption is expected to dip this year in the face of a broad economic slowdown. China’s February factory activity fell for a third month as the world’s second-largest economy continued to struggle with weak export orders. The weakness is also being felt across the wider region. South Korea’s exports contracted at their steepest pace in nearly three years in February as demand from China cooled further.
Despite this, fuel consumption, especially in Asia’s developing economies which are key drivers of global oil demand, is so far holding up. India’s diesel consumption, for example, is expected to rise to a record this year amid economic growth of around 7 percent.
In Venezuela, oil exports have plunged 40 percent to around 920,000 bpd since the U.S. government slapped sanctions on its petroleum industry on Jan. 28.
However, U.S. energy firms this week cut the number of oil rigs operating to the lowest in almost nine months at 843 active rigs. Some producers follow through on plans to cut spending despite an over 20-percent increase crude futures so far this year.
Canada’s main oil-producing province of Alberta on Thursday raised the amount of crude that companies can produce in April to 3.66 million bpd, an increase of 100,000 bpd from the limit imposed in January
Asia’s naphtha crack dropped from a two-month high to touch a three-session low on Friday.
The March crack is lower at -$ 6.15 /bbl
Asia’s gasoline crack hit a three-month high of $1.80 a barrel premium to Brent crude on demand.
Petron was looking to buy up to 5.4 million barrels of 95-octane and 97-octane gasoline for June 2019 to May 2020 delivery through a tender closing on March 13.
This comes at a time of strong demand from Indonesia and India. Indonesia, also Asia’s top gasoline importer, has been buying more gasoline for March, which could be due to factors including lower fuel prices and coming elections. Pertamina has paid discounts lower than $1.50 a barrel to Singapore 92-octane quotes on a free-on-board (FOB) basis for some of the 88-octane grade cargoes it was recently seeking through tenders. This was higher compared with discounts below $2 a barrel it had paid last year for 88-octane grade cargoes scheduled for first-half 2019 delivery.
ARA gasoline inventories fell by 25 KT in the week to Feb. 28 to 1.12 million tonnes, their fourth consecutive weekly drop. Stocks are still higher than previous year levels albeit marginally.
The March crack continues to recover and is now at $ 2.30 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash discounts for 10ppm gasoil were at 12 cents a barrel to Singapore quotes, the lowest discounts since Nov. 20. The benchmark gasoil discounts were at 13 cents per barrel on Thursday.
The March/April time spread, which returned to backwardation last week, was at a premium of 15 cents a barrel on Friday, compared with 19 cents a day earlier.
Meanwhile, cash differentials for jet fuel widened to 27 cents a barrel to Singapore quotes on Friday, as against a 25-cents discount on Thursday.
ARA Gasoil inventories fell marginally by 19 KT to 2.41 million tonnes.
The March crack is lower at $ 15.15 /bbl with the 10 ppm crack at $16.10 /bbl. The regrade has improved to – $ 0.75 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Cash premiums of Asia’s 380-cst high-sulphur fuel oil (HSFO) hit a nearly three-week high on Friday, lifted by firm buying interest for fuel cargoes in the Singapore trading window.
Cash premiums for 380-cst HSFO were at $2.96 a barrel to Singapore quotes, the highest since Feb. 11. They were at a premium of $1.70 a barrel on Thursday and $1.17 per tonne at the start of the week.
Meanwhile, official data this week showed fuel oil inventories in key storage hubs including Fujairah and Singapore climbing higher, while those in Amsterdam-Rotterdam-Antwerp (ARA) were lower.
ARA Fuel Oil inventories fell to 911 KT, a drop of 72 KT, in the week ended Feb. 28.
The March180 cst crack has shot up to $ 2.30 / bbl with the visco spread at $ 1.10 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
The fuel oil crack in the prompt is rising in the face of rising stocks which seems to suggest a play going on in the market. We will hedge one more tranche of Q2 FO crack at current value of $1.35 /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.