Crude Oil
Oil prices rose on Tuesday after U.S. sanctions on Iranian goods went into effect, intensifying concerns that sanctions on Iranian oil, expected in November, could cause supply shortages. Brent futures rose 90 cents to settle at $74.65 a barrel, after hitting a session high of $74.90. WTI crude futures settled 16 cents higher at $69.17 a barrel.
EIA reduced its estimate for US output growth to 11.7 mb/d in 2019 (from 11.8 mb/d) in its latest Short-Term Energy Outlook. Estimates for 2018 have also been reduced.
Amid the trade war with the US, China has reported a current account deficit of $28.3 billion in the first half of this year, which is the first in 20 years for the world’s second-largest economy. China also recorded its first quarterly current account deficit in nearly 17 years this year, ending its dream run of accumulating trade surplus as top exporter for years and the deficit carried on to the first half of this year.
Venezuela’s oil rig count rose for the first time this year to 27 in July, according to Baker Hughes. The oil rig count marks an increase of 1 from June, but is still 22 lower on a y/y basis.
API Data
The API reported a huge crude draw of 6 Million Barrels. US crude inventory has been swinging violently up and down every week for some unfathomable reason.
While this appears bullish, the builds in products, particularly in gasoline at the height of the driving season appears bearish.
Official data from the DOE will give the market further direction later today.
Naphtha
Asia’s naphtha physical crack dropped 9.7 percent to a 2-1/2 week low of $104.58 a tonne on Tuesday, its biggest percentage loss since June.
The balance August crack has dropped to $ 0.15 /bbl.
Gasoline
Asia’sgasoline crack hit $8 a barrel, its highest since July 31. Recent operational issues surrounding Shell’s refinery and petrochemicals site in Singapore could have been a reason behind the stronger gasoline value.
The balance August crack has jumped to $ 9.60 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s refining margins for 10ppm gasoil rose to their highest in over a month on Tuesday as the front-month spread widened its backwardated structure and cash premiums rose to two-month high despite a lack of deal activity in the Singapore trading window. The strength in the gasoil market follows expectations for firming near-term demand, and comes despite rising seasonal exports from India as monsoon rains there limit consumption of the fuel.
Cash premiums for gasoil with 10ppm sulphur content climbed to 20 cents a barrel to Singapore quotes, up from 18 cents on Monday and their widest premium since June 6.
Indonesia plans to require all diesel fuel used in the country to contain biodiesel starting next month to boost palm oil consumption, slash fuel imports, and narrow a yawning current account gap. While the proposal has been welcomed by the palm oil industry and government, it has raised concerns among the automobile industry the fuel could impact engine performance. With the current account deficit estimated to grow by $8 billion in 2018, the plan is to cut diesel imports by mandating that all diesel consumers, including power plants and railways, use biodiesel that contains 20 percent bio-content (B20), typically palm oil. Operations at Royal D.
The balance August crack has improved to $ 14.50 / bbl with the 10 ppm crack at $ 15.40 /bbl. The regrade has fallen to $ 0.35 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s fuel oil market slipped on Tuesday, with cash premiums, cracks and time spreads extending losses, as fresh spot supply from the Middle East helped relieve concerns of a persistent tightness in Singapore fuel oil supplies over the near term.
Fresh spot tenders from Bahrain and Kuwait emerged this week, raising prospects of increased fuel oil shipments from the Middle East into Singapore after months of below average flows. With peak seasonal demand for fuel oil in the Middle East due to ease around end of August, markets now estimate Middle East fuel oil exports to Singapore to total about 1.6-1.8 million tonnes in August. The higher Middle East exports in August are also supported by high inventories of the fuel in the Fujairah oil hub, currently at a 2018 high, and a steeply backwardated market structure which encourages reducing volumes held in storage.
Markets expect Singapore to receive about 3 million tonnes of Western arbitrage fuel oil volumes in August, about 2 million tonnes less than what it typically receives.
The balance August 180 cst crack is marginally stronger at -$ 1.05 / bbl with the visco spread at $ 1.05 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to report today
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.