Crude oil finally snapped its downward streak after 5 days as the market arguably took cheer from a possible Clinton victory in the US election. However the rise was capped by a stronger dollar and continued doubts about OPECS ability to maintain production levels.
The Brent contract settled at $46.15 while WTI settled at $ 44.89 / bbl. Both, the US Presidential election and the stock data report are likely to have an impact on Crude Oil prices with the latter possibly weighing in more as we saw with Brexit.
Naphtha prices eased out following the reopening of the colonial pipeline on Sunday. The Naphtha crack eased off by over 50 cents per barrel and is showing a value of $ 1.5 / barrel for December
Gasoline too eased off considerably as, with the Colonial pipeline reopening, the overhang of Singapore stocks continues to bear on the market. Currently, the gasoline crack is trading around a value of $ 11.20 / bbl for December.
Gasoil prices too seem to be easing considerably even though the market remains well bid in the front. December is currently valued at $ 13.50 / bbl.
This crack bears close watching as we head into the winter season. With stock levels acting as a bearish factor while a cold winter may increase demand.
The Jet crack does not seem to have suffered as much as the Gasoil crack resulting in the strengthening of the regrade with the January regrade quoting at a heatlhy $ 1.00 / bbl.
Nevertheless this may well be the result of a structural difference in the forward curves for both commodities. While the Gasoil curve is strongly backwardated (which is indicative of good demand), the jet curve actually has a November December contango followed by a mild backwardation.
Under the circumstances, selling the regrade looks like an attractive trading idea.
The November fuel oil crack has finally flipped into positive territory showing a level marginally above the value of Dubai in November. The December crack is valued at a shade under -$ 1.0 /bbl.
As the value of the product comes up to the level of Dubai, even as the value of the distillate crack drops, its effect on refinery economics is worth noting at this stage.
With fuel oil fetching prices above Dubai, there is tremendous incentive for all refineries to use any spare CDU capacity to generate not only fuel oil, but also marginally offspec diesel like VGO, LCO etc. which can be used as cutter stock for more viscous products.
This should provide much needed supplies and ease the fuel markets.
A savvy refinery can easily defend this production decision by selling the FO crack and producing whatever fuel oil it can.
Hence, we are of the opinion that levels of parity or a small discount or premium are not really sustainable for long.
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.