Crude Oil
US Oil continued to feel the aftershocks of a decline that had the market reeling with its severity. Brent, however seemed to have found support at current levels for now. Brent crude futures settled 6 cents lower at $72.83 a barrel. WTI crude futures, however, 55 cents to settle at $63.14.
For the week, Brent lost 6.2% while WTI lost around 6.6%. This was the fourth consecutive weekly loss.
While sanctions against Iran kick in next week, the US has allowed 8 major players to continue importing from Iran, sanctions notwithstanding. Countries allowed include China, India, Japan and Korea. Whether this allowance is a concession of its inability to fully enforce the sanctions against Iran in a meaningful manner or not is up for debate. Nevertheless, the impact of the sanctions is going to be largely softened as a result of this allowance.
High oil prices also appear to be having an economic impact in China. China’s Caixin Services PMI missed forecasts at 50.8 for October, v.s. expectation 52.8, in the latest of data points which have underwhelmed forecasts this month
Hedge funds and money managers cut their net long U.S. crude futures and options positions in latest week to a fresh one-year low, according to data from the U.S. Commodity Futures Trading Commission.
In some small support for prices, the number of active rigs in the US declined by one to 874.
05 Nov 18
Skidddddddddddddd..
Oil prices have posted their fourth weekly loss in a row. All charts are showing tremendous bearishness with the daily chart returning into a downward channel created around 3 weeks ago. The weekly chart shows prices falling below a downward channel created from 5 weeks ago. The monthly chart appears to confirm a break out of the long term upward channel.
Oscillators have entered oversold territory in both daily and weekly charts.
Trading Strategy
Last week we had suggested buying around $ 75.50 with a stop below $ 75.00. Traders who managed to enter and exit this trade at a profit would count themselves lucky as prices never really looked back after breaking $ 75.00 /bbl.
The continued streak and the status of oscillators would suggest buying at around $ 72.60 targeting first $ 73.50 and then $ 74.25-50. However, momentum selling could well take it past $ 72.00 towards our medium term target of $ 69.90, hence a tight stop loss of $ 71.75 is recommended.
Supports and Resistances
The first support lies in the $ 72.20-40 area. The next real support comes around $ 70.50-75 followed by our target area of $ 69.90.
The first resistance is around $ 73.40-50 area followed by $ 74.25-50 area and then around $ 75.00/bbl.
For bigger charts, check out our Technical Views page
Naphtha
Asia’s naphtha crack was near a 25-month low of $47.95 a tonne as excess supplies countered a stream of demand seen this week. Naphtha cracks would therefore remain weak in the near-term. It might turn slightly positive around first quarter of 2019.
The November crack has dropped to – $ 6.05 / bbl
Gasoline
Asia’s gasoline crack fell to a near 28-month low of $1.76 a barrel on Friday due to ample supplies.
Gasoline stocks in ARA fell to a five-week low of 985 KT in the week to Nov. 1. This was still 28% higher than a year ago.
The November crack has dropped to $ 2.75 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for 10ppm gasoil fell to 54 cents a barrel to Singapore quotes, the weakest since Oct. 8. Premiums were at 66 cents on Thursday.
Meanwhile, gasoil stocks independently held in ARA declined for a third straight week to 2.5 million tonnes, the lowest levels in two months.
Jet cash discounts widened to 12 cents a barrel to Singapore quotes on Friday, from a 1-cent discount on Thursday.
The exchange of futures for swaps (EFS), which determines the Asian gasoil price spread between east and west , widened to about minus $25 a tonne on Friday. Arbitrage is usually profitable when the EFS trades at about minus $15-18 a tonne and below.
The November crack has dropped to $ 16.20 /bbl with the 10 ppm crack at $ 17.10 /bbl. The regrade is higher at $ 0.60 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s prompt month-time spread for 380-cst fuel oil grade extended gains on Friday as the supply crunch persisted.
The 380-cst Nov/Dec time spread was trading at about $12.25 a tonne, up from $11.50 a tonne on Thursday.
Fuel oil stocks in ARA fell to a near 7-month low of 944 KT in the week to Nov. 1.
The November 180 cst crack is higher at +$ 3.80 / bbl with the visco spread at $ 1.00 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Fuel Oil cracks still continue to rise. The 1Q19 crack has turned positive so we shall lay on one tranche more at current value of $ 0.05 /bbl.
In the meanwhile, the pressure on the middle distillate cracks has eased enabling us to close out one position.
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.