Brent crude managed to stay steady notwithstanding extremely bearish DOE data. Brent crude futures dropped just 2 cents to settle at $75.36 a barrel. WTI futures fell 79 cents to settle at $ 64.73 /bbl
The European Commission said it has designed new rules to protect EU firms dealing with Iran from US sanctions. In addition, they have formally added the US sanctions to EU’s blocking statute, which will be passed into law if neither the European Parliament nor EU Council object. They are hoping to put the statute in force by early August, before US sanctions take effect on 6 August. Europe collectively purchases some 700kbd of Iranian crude.
The European Union asked for exemptions from expected U.S. sanctions on Iran and the bloc’s lending arm balked at supporting Iranian projects, signs of the mounting difficulties in meeting a political pledge to stick with the landmark nuclear deal. The troubles emerged as a senior Iranian envoy demanded results from EU negotiations “very soon” and said a failure to provide economic guarantees would result in the resumption of Tehran’s atomic activities
The DOE reported surprise builds across both crude and products last week catching the market totally by surprise. While the market had expected products to build, this was far more than the consensus expectation.
The crude build appears to have arisen by a huge increase in imports and a significant reduction in exports. While refinery runs increased to a seasonal high of 95.4%, the increase in crude consumption does not seem to have been proportionate.
The increase in distillate stocks seems to have come out of an increase in production at the expense of gasoline and a huge drop in demand of the order of 800 kb. A drop in exports of over 500 kb / day was also a significant contributor. While the increase in distillate stocks is welcome as a buffer, it is worth noting that they are still at their lowest for this time of the year.
The gasoline build appears to be contrary to what is visible in our material balance statement. The whole gasoline situation is a bit of an enigma. A drop in gasoline production inspite of an increase in refinery runs during the driving season is counter intuitive. The huge drop in gasoline demand is at best counterintuitive and a disappointing indicator for future concerns.
Click Here for analytical charts on the DOE data
Asia’s naphtha crack fell for the second straight day to reach a near 1-1/2 month low of $87.60 a tonne on Wednesday as high oil prices and weak gasoline fundamentals weighed. But naphtha spot premiums stayed strong due to demand. Cargoes delivered into South East Asia were still fetching premiums in the high teens.
The balance June crack is at -$ 2.05 / bbl
Asia’s gasoline crack fell for the tenth straight session to $7.28 a barrel, the lowest since May 15, on ample supplies. Adding to the supply is extra refinery capacity in Vietnam, where its second refinery is expected to be fully operational by early August.
As for inventories, Japan’s gasoline inventories rose 550,000 barrels to reach nearly a one-year high of 11.66 million barrels in the week to June 2. Inventories in Fujairah also rose by 1.7 million barrels to 7.5 million barrels, around 36% higher than last year.
The June crack has dropped to $ 8.65 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash differentials for jet fuel widened their discounts on Wednesday amid slowing demand and expectations of higher supplies in the near term. Jet fuel cash differentials were at a discount of 13 cents a barrel to Singapore quotes, compared with a discount of 3 cents a barrel on Tuesday. The jet fuel price is too high in the region and that is making it difficult for airlines to buy. Singapore jet prices have eased about 6 percent since hitting its highest so far this year last month, but they are still hovering around levels not seen since late 2014.
Meanwhile, cash premiums for gasoil with 10 ppm sulphur content dipped to 21 cents a barrel to Singapore quotes, from 29 cents on Tuesday. The gasoil market will come under further pressure as Asian refineries, especially the ones in China, return from seasonal maintenance and supplies increase along with inventories in Singapore.
Middle distillates inventories in the Fujairah Oil Industry Zone (FOIZ) climbed about 15 percent from a week ago to 2.65 million barrels in the week ended June 4. This is around 7% higher than last year
The balance June crack has dropped to $ 13.20 / bbl with the 10 ppm crack at $ 14.05 /bbl. The regrade is at $ 0.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
The July East-West (EW) arbitrage spread climbed to its highest in more than six months on Wednesday, but kept arbitrage opportunities from West of the Suez to Singapore limited amid a backwardated market structures in Singapore. Elevated freight costs, in part fuelled by higher shipping fuel prices, as well as strong seasonal demand for European fuel oil supplies from the Middle East also helped cap arbitrage opportunities.
The 380-cst fuel oil July arbitrage spread was at $17.50 a tonne, up from about $16.75 a tonne in the previous session and its highest since Nov. 28. Meanwhile, the 380-cst prompt month time spread fell from multi-month high this week after it fell 75 cents a tonne on Wednesday to a premium of $3.75 per tonne..
The balance June 180 cst crack is lower at -$ 2.70 / bbl. The visco spread has narrowed to $ 1.50 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Nothing fresh to report in this section today.
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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.