Crude Oil
Oil rose nearly 2 percent on Friday after proposed trade talks between the United States and China eased some fears about a global economic slowdown. Brent crude futures gained $1.11 to settle at $57.06 a barrel. WTI crude futures rose 87 cents to settle at $47.96 a barrel.
Oil drew support from comments by China’s commerce ministry, which said Beijing would hold vice-ministerial trade talks with U.S. counterparts on Jan. 7-8. The news helped boost sentiment across riskier assets including the U.S. equity and oil markets. Also supportive was news that China’s services sector extended its expansion in December, bucking a trend of downbeat economic data. A robust U.S. jobs report also added to broader market optimism.
However, gains were capped after the United States reported a sharp build in refined product inventories.
U.S. energy firms this week cut oil rigs for the first time in three weeks, reducing the rig count by eight to 877.
As mentioned in our commentary yesterday on the API data, Crude stocks stayed virtually unchanged at 441 million barrels. However, both Gasoline as well as distillate stocks jumped (6.9 million barrels and 9.5 million barrels respectively) as run rates stayed at a record seasonal high of 97.2%.
Crude stocks stayed flat as rise in net imports was offset by a corresponding increase in demand for production.
However, the excess production, of both Gasoline as well as distillates, combined with a huge drop in demand, led to the large build.
Naphtha
Asia’s naphtha crack rose by 4.6 percent to a two-session high of $42.78 a tonne, possibly held up by gasoline as the former is used as a blending component in petrol. But demand for the fuel from the petrochemical sector remained muted.
The January crack has sunk further to -$ 4.45 /bbl
Gasoline
Asia’s gasoline crack rose for a second straight session on Friday to a nine-week high of $1.67 a barrel, as traders expect lower gasoline exports from China following a surge in volumes last month.
Singapore’s onshore light distillates stocks hit a record high of 16 million barrels in the week to Jan. 2. This was due to a surge in Chinese exports being shipped to Singapore in December. In the weeks ended Dec. 12 and Dec. 26, China shipped nearly 350 KT and 260 KT tonnes of gasoline to Singapore respectively. Gasoline inventories at ARA were at a more than eight-month high of 1.37 million tonnes in the week to Jan. 3 as well. U.S. gasoline stocks are also at a seasonal high.
The January crack has increased to $ 2.50 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10ppm gasoil were at 46 cents a barrel to Singapore quotes on Friday, compared with a 62 cent discount on Thursday. The firming up of prices could have been caused by a drop in stocks in both Singapore and ARA.
Singapore’s onshore middle distillates stocks droped by nearly 200 KB to 11.33 million barrels in the week to Jan. 2. This was the first drop in stocks in four weeks. ARA Gasoil stocks also dropped marginally by 15 KT.
The draw down could be a turning point for the gasoil market in the region though it might take more time for cash differentials to flip back to premiums.
Cash discounts for jet fuel widened to $1.35 a barrel to Singapore quotes on Friday, compared with a $1.32 discount on Thursday.
The January crack has jumped to $ 12.85 /bbl with the 10 ppm crack at $ 13.80 /bbl. The regrade is lower at $ 1.70 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst barge fuel oil crack narrowed its discount to Brent crude on Friday despite rising crude oil prices over the past four straight sessions.
The February crack firmed to about minus $6.40 a barrel to Brent crude on Friday from minus $7 a barrel in the previous session.
Singapore fuel oil inventories dipped to a three-week low in the week ended Jan. 2. Stocks declined 152,000 barrels to 20.05 million barrels in the week to Jan. 2. In ARA, stocks jumped 12 percent by 129 KT to 1.21 million tonnes.
The January 180 cst crack has strengthened to $ 0.10 / bbl with the visco spread at $ 0.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Fuel Oil cracks are once again strengthening. We shall keep an eye on 2Q19 as well as March should it venture into positive territory.
Cal 20 distillate cracks are strengthening as well. our next targets would be $ 20 /bbl for Jet and $ 19 / bbl for 10 ppm Gasoil.
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.