Crude Oil
Oil prices rose more than 1% on Friday and posted sharp weekly gains after OPEC and allies agreed to deepen output cuts by 500 kbpd in the first quarter of 2020. Brent crude futures rose $1.38 cents to settle at $64.38 a barrel. WTI was rose 77 cents to close at $59.20 a barrel.
Brent futures rose about 3% for the week. WTI futures gained 7% on the week, their biggest rise since June
he OPEC+ cuts next year are in addition to the group’s previous agreed curbs of 1.2 million bpd and will represent about 1.7% of global oil output. The cuts will last throughout the first quarter. The group will meet again in early March for an extraordinary meeting to set its policy.
OPEC will shoulder around two thirds of the additional cuts. Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom, would continue a voluntary cut of 400,000 bpd. He added that after improved compliance from other members, the actual cut will be effectively 2.1 million bpd.
Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range. The sale was the world’s biggest IPO, beating Alibaba Group Holdings’ $25 billion listing in 2014, but fell short of a $2 trillion valuation for Aramco sought by Saudi Crown Prince Mohammed bin Salman. Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.
Naphtha
Asia’s naphtha crack firmed on Friday, reversing losses from earlier in the week as concerns about tight arbitrage supplies from the Middle East underpinned the market.
Increased arbitrage shipments from West of the Suez are helping make up for the Middle Eastern supply shortfall. Naphtha crack climbed to $113.08 a tonne on Friday, its best level since a near two-year high of $123.73 a tonne last week.
Gasoline
Asia’s gasoline crack also firmed, reaching a more than two-week high of $8.81 a barrel after three straight sessions of gains. Gasoline stocks in ARA rose by 18 KT to 764 KT.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for gasoil with 10 parts per million (ppm) sulphur content rose for a fifth consecutive session on Friday to $1.04 per barrel to Singapore quotes, compared with 84 cents per barrel on Thursday.
Gasoil stocks in ARA rose marginally by 13 KT to 2.35 million tonnes.
Cash discounts for jet fuel were at 42 cents per barrel to Singapore quotes on Friday, compared with a 36-cent per barrel discount a day earlier.
Jet fuel cracks have gained 4.7% this week, but they were about 6% lower than their seasonal levels for this time last year. The market for the aviation fuel has remained under pressure most of this year due to slowing economic activity in the region and the ongoing U.S.-China trade war, which has impacted air freight volumes. Asia-Pacific airlines posted a 5.3% fall in air freight demand in October, compared with the same month a year earlier.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The price spread between delivered 0.5% very low-sulphur fuel oil (VLSFO) bunkers and the more expensive marine gasoil (MGO) narrowed on Friday, boosted by firm demand and supply bottlenecks.
Barge availability has been limited by efforts to convert high-sulphur barges to lower-sulphur alternatives as well as to recalibrating their flow meters, creating a backlog of demand.
The VLSFO-MGO price spread has traded at as little as $15 per tonne and even $5 per tonne for prompt loading dates.
ARA fuel oil inventories rose by 51 KT to 935 KT, a four week high in the week ended Dec. 5.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action 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.
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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.