After staying in the red for most of the trading day, oil prices surged in the last couple of trading hours to close in positive territory. Brent futures gained 26 cents to settle at $73.62 /bbl while U.S. crude futures gained 49 cents to settle at $ 68.42 /bbl.
The major causes of this surge can be attributed to a video released on YouTube and Twitter showing Iran’s foreign minister saying that any demands from US President Donald Trump to renegotiate the deal are unacceptable.
Additionally, the Sullom Voe terminal, from which Brent cargoes are loaded, was shut down on Wednesday for at least 3-4 days after a routine inspection revealed a minor defect at the terminal. A minimum of 3 cargoes of the June Brent loading program were deferred as a result. The Brent and Ninan pipelines carry around 100 kbpd of crude.
In other news, Sinopec has declared that it will reduce its purchases of Arab Light from Saudi Arabia by 40% in June and July as the current prices of the crude did not make it economically viable. The exact methodology for this reduction is not clear as Saudi Arabia only sells crude in term contract. We expect that this could result in a swap for heavier grades of crude which Saudi Aramco may not be averse to selling in this high prices regime.
Asia’s naphtha crack hit a one-month high of $88.25 a tonne supported by demand as most buyers have maximized using liquefied petroleum gas (LPG) as an alternative feedstock for a few months now given the wide gap between the two fuels. Demand for naphtha so far has been firm and more buyers are expected to emerge to buy naphtha for second-half June delivery.
The crack for balance May is steady at -$ 0.90 / bbl.
Asia’s gasoline crack fell to a four-session low of $6.60 a barrel as a build-up in gasoline stocks in the U.S. could have offset the drawdown in inventories in Singapore. Light Distillate stocks in Singapore fell by 692 Kb to 12.51 million barrels. This is the lowest level of stocks since November 2017. ARA Gasoline stocks also fell to just below 2017 levels at 1084 KT.
The May crack has dropped further to $ 9.85 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash premiums for jet fuel and 10 ppm gasoil fell on Thursday, which reflected concerns that the domestic markets may start weakening in a couple of months once refineries start coming back from seasonal maintenance. .
Cash differentials for gasoil with 10 ppm sulphur content slipped to 36 cents a barrel to Singapore quotes, down from 41 cents on Wednesday. Cash premiums for jet fuel dipped to $1.02 a barrel to Singapore quotes, compared with $1.12 on Wednesday.
Middle Distillate stocks in Singapore plunged to their lowest level in nearly three months as stocks fell by 282 KB to just above 8 million barrels. This is the lowest level for this time of the year and just above the lowest level for the year of 7.7 million barrels seen in February.
ARA Gasoil stocks also dropped by 77 KT to 2058 KT, a level last seen in December 2017. The drop in distillate stocks around the globe bodes well for distillate margins going forward.
The balance May crack has falled to $ 14.85 / bbl with the 10 ppm crack quoting at $ 15.40/bbl. The regrade is valued at $ 0.40 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s 380-cst fuel oil market gave up gains seen in the previous sessions after the front-month time spread and crack were sold down on Thursday. But the downside risk to prices could be limited over the near-term due to expectations of narrow arbitrage re-supply from Europe and the Middle East stemming from rising regional demand for the fuel in the summer as well as scheduled refinery maintenance.
The 380-cst May/June time spread was trading at about $2.70 /MT on Thursday, down from about $3.25 /MT on Wednesday.
This came as official data showed Singapore onshore Fuel Oil inventories edged higher in the week to May 2, snapping five straight weeks of decline. Singapore weekly onshore fuel oil inventories rose by 334 KB to 17.729 million barrels in the week ended May 2.
ARA Fuel stocks fell by 152 KT to 1017 KT. These levels are similar to last year’s levels.
The May 180 cst crack has slumped to -$ 5.60 / bbl. The visco spread has narrowed $ 1.80/bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
The Cal -19 strips for Jet and Gasoil have once again blown out with Jet at $19.45 /bbl and 500 ppm gasoil at $ 18.55 /bbl. While we are checking the market, we would recommend staying hedged and adding if the market rises beyond this.
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.