Crude Oil
Oil prices continued to drop, ceding an additional 1% on Tuesday as containment of the coronavirus continued to look doubtful. Brent futures fell 49 cents to settle at $53.96 a barrel. WTI crude futures fell 50 cents to settle at $49.61 a barrel.
In early trading, prices bounced higher on hopes of further output cuts from the OPEC+ group. However, they retraced as such cuts may not be sustainable. The producer group could face an uphill battle to put more cuts in place so soon after the existing pact was agreed to especially given the uncertainty over how long the virus crisis will last. Price gains were also limited by Russian Energy Minister Alexander Novak’s comments that he was uncertain it was time to tighten oil output curbs.
Fears of the virus-related slump in global energy demand have flipped the market into contango this week, indicating a large crude surplus not expected to clear at least until Aug’20, analysts and traders said. Brent crude has not been in contango since Jul’19.
The death toll from the coronavirus outbreak in China rose to 490 as of the end of Monday (+65 DoD), the country’s National Health Commission said on Tuesday. Across China, the total number of confirmed infections was 24,324 (+3,887 DoD).
Growth in China’s services sector slowed for a 2nd straight month in Jan’20, a traditionally busy sales season, with the Caixin/Markit services PMI slowing to 51.8 (-0.7 MoM), as companies cut prices and new orders dipped.
api data
The API data continues to look bearish as gasoline stocks also built along with crude stocks. However, distillate stocks keep on drawing and, going forward, this may provide the source of price support.
Naphtha
No fresh news on the naphtha markets today.
The February crack is steady at – $ 1.60 / bbl. The March crack is at -2.60
Gasoline
Asia’s gasoline crack rose for a fifth straight session on Tuesday and hovered near a two-month high of $7.30 a barrel amid a choppy market, as it was unclear if China would cut petrol exports due to refinery run cuts on weak home demand.
China is Asia’s top gasoline exporter and the number of cargoes it releases to the market directly affects prices and sentiment. Within the domestic market, China will cut retail ceiling prices for gasoline by 420 yuan ($60.07) per tonne and diesel by 405 yuan, in the first price reduction this year tracking a fall in global oil prices.
Britain will ban the sale of new petrol, diesel and hybrid cars from 2035, five years earlier than planned, in an attempt to reduce air pollution that could herald the end of over a century of reliance on the internal combustion engine.
The February crack is lower at $7.30 /bbl.
The March crack is at $7.35 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil in Singapore climbed to 77 cents per barrel to Singapore quotes on Tuesday, backed by firmer deal values in the Singapore physical trade window. The premiums for the benchmark gasoil grade were at 48 cents per barrel on Monday.
Asia’s cash premiums for jet fuel slipped to their lowest in over two weeks on Tuesday, hurt by muted buying interest for physical cargoes. Cash premiums for jet fuel fell to 15 cents per barrel over Singapore quotes on Tuesday, down from 16 cents per barrel a day earlier.
The February/March time spread for jet fuel narrowed their backwardated structure on Tuesday to trade at a premium of 7 cents a barrel, compared with 8 cents on Monday.
The February crack for 500 ppm Gasoil has risen to $11.70 /bbl with the 10 ppm crack at $ 12.35 / bbl. The regrade is at -$ 2.05 /bbl.
The February crack for 500 ppm Gasoil is at $11.40 /bbl with the 10 ppm crack at $ 12.05 / bbl. The regrade is at -$ 1.45 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month price differential between 0.5% VLSFO and 380-cst HSFO fell to a more than four-month low on Tuesday, extending steady losses since early January. The March VLSFO-HSFO price spread fell to $189 per tonne from $210.50 in the previous session – its lowest since Sept. 30.
The narrowing price spread came as front-month VLSFO paper prices traded unusually lower despite rising crude oil prices, while HSFO paper prices traded higher. Oil product prices typically trade in tandem with crude oil prices from which they are produced.
Meanwhile, physical trade liquidity returned to the Singapore trading window on Tuesday after more than a two-week absence, lifting cash premiums for 380-cst HSFO cargoes from a near two-month low.
The February 180 cst crack has jumped to -$ 8.10/ bbl with the visco spread at $ 1.15 /bbl.
The March180 cst crack is at -$ 8.55/ bbl with the visco spread at $ 1.05 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for today. We are cautiously going to enter a hedge for jet consumers in 2Q 2020 vis a vis 10 ppm gasoil at -$1.45 /bbl. The absymally low levels have been triggered by the coronavirus. We are hoping that it will be contained over the next two months and the regrade returns to more normal levels.
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.