Crude Oil
Brent oil rose on Wednesday, driven higher by a threat from an Iranian commander and a drop in U.S. crude inventories for the second week in a row. Brent futures settled up 48 cents at $78.24 per barrel. U.S. crude futures were up 19 cents at $74.33 a barrel, within sight of Tuesday’s 3-1/2-year high above $75 a barrel. There is no settle for WTI as the US was closed yesterday.
The price rose above $78 a barrel after an Iranian Revolutionary Guards commander said he was ready to prevent regional crude exports if Iranian oil sales were banned by the United States.
Looming U.S. sanctions on Iranian crude exports, force majeure in Libya, and unplanned pipeline outages in Nigeria have been clouding the supply outlook despite rising output by the Organization of the Petroleum Exporting Countries.
Implied options volatility, a way of measuring uncertainty among crude oil traders and investors, is at its highest since the run-up to last month’s OPEC meeting where an agreement was reached to ease output curbs in place since January 2017. With the outlook unclear, investors were turning to options to protect themselves against any sudden move.
In the meanwhile, President Trump has been tweeting for lower oil prices again as pump prices for gasoline cross $ 3 / gallon where demand destruction appears to be happening.
The Development Bank of China has approved a loan of US$ 5 billion to Venezuela to increase petroleum development. The Venezuelan Finance Minister, Simon Zerpa, said to Prensa Latina that such ties make it possible to establish alternative international trade networks and financial systems that open up possibilities of economic cooperation beyond the framework of the United States, which has attempted to strangle Venezuela with economic sanctions. It seems more or less clear that China is likely to ignore the US call for sanctions on Iran.
Naphtha
Lights Asia’s naphtha crack rose for a second day on Wednesday to reach a three-week high of $86.10 a tonne, supported by strong demand. After a brief surge in late May, led by demand from Asia’s top importer Indonesia, gasoline margins deteriorated again, eroded by a surge in Brent crude prices. .
The July crack has improved to -$ 1.25 / bbl
Gasoline
Asia’s gasoline crack fell for the second straight day to a nearly two-year low of $3.38 a barrel as high oil prices hurt demand. Gasoline stocks in Fujairah rose to a 3 month high of 7.7 million barrels, up 1.1 million barrels from the previous week.
The July crack is lower at $ 6.90 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for 10ppm gasoil widened their discounts on Wednesday to drop to their lowest levels so far this year, while the prompt-month spread remained at its maximum contango in a week.
Cash differentials for gasoil with 10ppm sulphur content were at a discount of 25 cents a barrel to Singapore quotes, compared with a discount of 24 cents on Tuesday. Cash differentials for jet fuel were at a discount of 24 cents a barrel to Singapore quotes on Wednesday, from a discount of 25 cents on Tuesday.
Middle distillates inventories in the Fujairah Oil Industry Zone (FOIZ) climbed to levels not seen since September. Stocks for middle distillate products rose 15.4 percent from a week ago to 3.33 million barrels in the week ended July 2. Since the start of the year, middle distillate inventories in the Fujairah oil hub have averaged 2.4 million barrels a week, compared with a weekly average of about 3.3 million barrels in 2017. Compared with year-ago levels, the weekly Fujairah middle distillate inventories were about 2 percent higher.
The July crack is higher at $ 12.10 / bbl with the 10 ppm crack at $ 13.00 /bbl. The regrade is higher at $ 1.50 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s fuel oil markets softened on Wednesday, further slipping away from multi-month highs seen in the previous week, but sentiment remained supportive on expectations of tight supplies and firm demand through August. This came as 380-cst fuel oil cash premium and the prompt-month time-spread slipped to its lowest in more than a week on Wednesday.
Fujairah Oil Industry Zone (FOIZ) fuel oil inventories climbed for a second straight week, rising 212,000 barrels to a three-week high of 9.131 million barrels in the week ended July 2. However, compared with the same time last year, Fujairah fuel oil inventories were 25 percent lower.
The July crack is lower at -$ 2.40 / bbl with the visco spread at $ 1.10 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
As Naphtha strengthens and Fuel Oil weakens, our hedges for Q3 seem to be coming back into the money.
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.