Crude Oil
Crude oil prices stayed firm yesterday even as moving higher appeared to be an uphill task. Brent crude futures, settled 16 cents higher at $67.78 /bbl. WTI crude futures rose 29 cents to settle at $61.73 /bbl.
As of now, the bulls hold sway over the market. However, there appear to be a number of clouds looming over the horizon.
One area of concern, particularly in Asia, is that of refining margins. The refining margin of a typical complex refinery n Singapore fell on Friday to $5.93 a barrel, the lowest since May 23 according to Reuters. This drop in margins could reduce Asian refiners’ demand for incremental crude in the near term and weigh on global prices.
Another factor that could weigh on prices is the amount of speculator length. This has been running at a ratio of 9 long positions for every short position in crude oil futures. Should there be a drop in prices, there could be a mad scramble as there simply aren’t people with enough short positions to provide liquidity. The situation is worse in US Heating Oil futures where the ratio is 10 : 1, a level not seen since November 2010. And if you thought that was bad, the position in ICE gasoil is at 16:1. Incredibly, the record was 19:1 in October last year.
In other news, Bloomberg ship-tracking data suggests that Brazil crude exports rose 22% y/y to 1.008 mb/d in 2017, with Lula being the top exported oil grade. Top buyers include China and the US, to which exports surged 15% and 54% to 497.8 kb/d and 161.4 kb/d respectively.
Naphtha
The Naphtha crack hovers around 10 week lows as it settled at $ 102.70 /MT. Prices were somewhat buffered as Hanwha picked up some naphtha to substitute for a cargo of crude condensate which got delayed due to a tanker collision.
Recent higher prices for naphtha, used to make petrochemcials and gasoline, attracted the highest volume of naphtha shipments from the west to Asia in two years.
The balance January naphtha crack is marginally at $ 1.65 /bbl.
Gasoline
The Asian physical gasoline crack to Brent settled below $7 /bbl for the first time since September 2016. The sentiment on gasoline is further weighed down by the export quota assigned to China’s four state oil majors. This is 30% higher than the quotas given to them last year and can possibly lead to a glut of supplies in the market.
The balance January 92 RON crack is marginally higher at $ 9.95 /bbl.
Distillates
The outlook for gasoil remains mixed as ample supplies battle a bitter cold wave in the US. U.S. distillate stocks fell by 24 million barrels over the course of 2017, the largest annual drawdown for at least a decade. The winter heating season has not yet reached the half-way point in the United States and already heating demand has been much higher than in the two previous years, though still slightly below the long-term average.
Asia’s jet fuel crack rose above $15 a barrel on Monday to its highest in about three sessions, reflecting demand and easing Dubai crude values. Traders expect the Lunar New Year festive season in February to support jet fuel in the coming days, though cash differentials were still at a discount to Singapore quotes.
The balance January is still lower at $ 13.85 / bbl. today. The 10 ppm Gasoil crack is at $ 15.10 /bbl. The regrade has eased to $ 0.55 /bbl
Fuel Oil
The star performer of 2017 seems to have slipped into the doldrums over the past few weeks.
The February 180-cst fuel oil crack to Brent crude fell for a fourth straight session to minus $7.38 a barrel, its widest discount since November 2016.
A drop in demand, an increase in supplies and high crude prices have really hurt the Fuel Oil market as cracks have dropped by nearly $ 3 /bbl.
Pakistan has issued a sell tender which is something that has not been seen in a long time. It has suspended its purchase of fuel oil indefinitely due to rising stocks in the country. It is also looking to switch to LNG, a muc hcleaner fuel in order to contain pollution..
Clearlake, Gunvor’s shipping arm, has chartered a very large crude carrier, Saham, to load up to 270,000 tonnes of fuel oil from Denmark around Jan. 11 for discharge into Singapore by end-February for a $3.05 million fee, according to ship broker sources and ship tracking data in Reuters Eikon.
The balance January 180 cst crack is still lower at -$ 5.65 /bbl today. The visco spread is valued at $ 0.35 /bbl.
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