The DOE reported a build of 13.8 Million barrels in crude which was in sync. with the API figures. However it showed a small draw of -0.9 MB for gasoline and unchanged stocks for diesel.
The market took these figures to mean ‘they were not as bearish as the API suggested’ leading to short covering and elimination of weak shorts. However, watchers of the price action could see that this action was not particularly sustained.
So we continue to look for a direction from the market. The funds are firmly bullish (it does not help them to believe otherwise given the liquidation risk involved). The market in general would seem to prefer higher prices because it would support global economy. Fundamentals however, are not supporting them as of now.
We would recommend selling March swaps for Brent at this point in time with a stop above 58.32 on the spot.
The February MOPJ crack is valued at around $ 3.0 / bbl and March at $ 2.3 / bbl. The Singapore crack for February is valued at $ 1.8 /bbl for February.
Gasoline once again seems to have jumped up today. The February crack is valued at $ 13.8 cents /bbl and the March crack is at $ 13.4/bbl making it look like an attractive hedge once again.
The gasoil market flipped into a mild backwardation (a sign of bullishness) today. This was attributed to strong demand out of Sri Lanka where a shortfall of hydro power (caused by drought) hit its power resources. The regrade continued to to be dismal. The February crack is valued at $12.75 /bbl with the Regrade at -$0.50 /bbl.
Fuel Oil also slipped back into backwardation yesterday validating the view of traders that the fall was overdone. Stock data out today should give a better clue as to immediate direction. The February crack was valued at -$ 3.35/bbl and March at -$ 3.55 /bbl.
We would recommend hedging for the month of March as these are still reasonably good levels and if the markets break down, considerable savings can be achieved.
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.
Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity