Crude Oil
Crude Oil fell on Thursday after U.S. government data showed an unexpected build in crude oil stockpiles. Brent crude futures lost 85 cents to settle at $77.39 a barrel. U.S. crude futures fell $1.20 to settle at $72.94 a barrel, retreating from Tuesday’s 3-1/2-year high of over $75.
Public listing preparations of state-run Saudi Aramco have stalled, which may reduce the pressure on Saudi Arabia to keep oil prices high. Saudi Arabia has wanted to sell shares in Aramco to bring in foreign investment to diversify its economy, but legal concerns about listing in places like London or New York have presented complications.
Saudi Aramco has appeared to have demonstrably reacted to President Trump’s demand that supply curbs be lifted. Saudi Arabia reported to OPEC that it pumped around 10.5 million barrels of crude per day in June, an increase of 500 kb /d.
Iran is also preparing to mitigate the impact of the US sanctions as it seeks to put in place barter arrangements for its crude. The US has been threatening the world with consequences if they continue to engage in business with Iran.
In a threat to another oligopoly, Saudi Aramco has decided to price its crude off the DME Oman Marker rather than the historical Platts marker effective October 1, 2018. However, Platts Dubai will remain part of its pricing formula.
Markets were totally caught unawares by the DOE reporting a surprise build of 1.5 million barrels in crude stocks this week. While gasoline stocks drew marginally, distillate stocks built as well against expectations.
Notwithstanding the build, inventories at Cushing, Oklahoma, the delivery point for U.S. crude futures, fell to their lowest level since December 2014. due to the outage at the 360 kb/d Syncrude facility in Alberta, which is expected to persist through July.
Having said the above, our material balance statement shows a significantly higher build should have been reported. This could mean either that last week’s huge draw of 9 million barrels was overstated or we are set for further builds next week. We think it could more likely be the latter as crude imports were reported at a 2 – 1/2 year high of 9.05 mb / d, 700 kb/d higher than the previous week. Exports also slid by 660 kb/d. While refinery run rates dropped by 0.4% they were 5% higher than the same time last year.
Click here for analytical charts on US stocks.
Naphtha
Asia’s naphtha crack rose for the third day running to reach a one-month high of $88.13 a tonne on Thursday, supported by firm demand. Premiums this week for the heavy full-range grade for 2nd half August are back into the mid teens.
The July crack has again jumped to -$ 0.80 / bbl
Gasoline
Asia’s gasoline crack remained at low levels of less than $4 a barrel, with demand hampered by high oil prices. However, the crack could strengthen because Asia’s demand growth is expected to lag supply growth.
Onshore light distillates stocks in Singapore, which comprise mostly gasoline and blending components for petrol, eased by 133 KB to more than a seven-month low of 12.1 million barrels in the week to July 4. Gasoline Stocks in ARA decreased as well, falling by 57 kt to 985 kt, their lowest levels since the first week of January.
The July crack has jumped to $ 7.75 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Jet cash differentials edged higher on Thursday and were at a discount of 20 cents a barrel to Singapore quotes, the highest in about a month. Cash discounts on a barrel of jet were at 24 cents on Wednesday. The prompt-month spread for jet fuel flipped into backwardation on Thursday for the first time in nearly two weeks.
Meanwhile, cash differentials for 10ppm gasoil narrowed their discounts on Thursday amid a stronger deal, while the prompt-month spread narrowed its contango structure. Cash discounts for gasoil with 10ppm sulphur content were at 21 cents a barrel to Singapore quotes, compared with a discount of 25 cents on Wednesday.
Middle distillates stocks in Singapore climbed to their highest levels in eleven weeks at 9.51 million barrels. Stocks in ARA also rose by 97 KT to 2.1 million tons which is a seven week high.
The July crack is much higher at $ 12.95 / bbl with the 10 ppm crack at $ 12.95 /bbl. The regrade is steady at $ 1.50 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 380-cst high-sulphur fuel oil market steadied on Thursday after steady declines since the start of the week sent cash premiums and front-month time spreads to a more than one-week low on Wednesday.
Singapore’s fuel oil stocks fell to a 10-week low in the week to July 4. Singapore’s weekly onshore fuel oil inventories 1.155 million barrels to 17.527 million barrels in the week ended July 4. Stocks in ARA also fell by 106 KT to 1.5 million tons.
The July crack is stronger at -$ 1.95 / bbl with the visco spread at $ 1.10 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Weaker crude prices appear to have strengthened cracks dramatically in the front. This helps us close our naphtha positions. Our fuel oil positions are once again looking bad. Which means our physical products should gain.
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.