Crude Oil
Oil futures fell more than 4% on Wednesday in a wild swing, soaring close to a four-month high in early trade on an Iranian rocket attack on U.S. forces in Iraq before retreating as the countries quickly ratcheted back tensions. Brent futures fell $2.83, or 4.2%, to settle at $65.44 a barrel, their lowest close since Dec. 16. WTI crude fell $3.09, or 4.9%, to settle at $59.61 per barrel, its lowest close since Dec. 12.
In early trade, the Brent contract hit its highest since mid-September at $71.75. However, prices fell as it became evident the rocket attack did not damage oil facilities or harm any Americans. U.S. President Donald Trump backed away from days of angry rhetoric against Iran as the two countries tried to defuse a crisis over the American killing of Iranian military commander Qassem Soleimani.
More pressure coming from a surprise build in U.S. crude stockpiles.
The spreads between the session high and low were the widest for WTI since November 2014 and Brent since September 2019.
China’s producer prices in Dec’19 fell 0.5% YoY, marking the sixth month of contraction as manufacturers struggled with weak demand and the US-Sino trade war, while the CPI in Dec’19 rose 4.5% YoY, unchanged from the gain in Nov’19.
China has suspended its plan to implement a nationwide gasoline blend containing 10% ethanol this year, three sources briefed on the matter said, following a sharp decline in the country’s corn stocks and limited production capacity of the biofuel.
DOE data
The DOE reported a small crude build of 1.2 million barrels which was at odds with the market expectation of a significant draw. The build appears to have arisen from a small drop in run rates accompanied with a massive drop in exports. Indeed the drop in exports suggests a much bigger build as highlighted in our material balance statement below.
The material balance also shows huge anomalies between reported levels and stock movement based levels. Part of this could be due to end of year movements / adjustments.
Naphtha
Asia’s naphtha crack was lower, but tight supplies due to refinery maintenance prevented any dramatic fall. Asia’s naphtha crack edged down 73 cents to $75 a tonne, its lowest since Monday.
South Korea’s Hanwha Total bought heavy full-range naphtha for second-half February delivery to Daesan at premiums in the low $20s a tonne to Japan quotes on a C&F basis. On Nov. 28, Hanwha Total paid close to $35 a tonne for a similar grade scheduled for first-half January delivery. Hanwha Total’s deal came a day after YNCC snapped up more than 200 KT of open-specification naphtha for second-half February arrival at Yeosu.
LG Chem, which has reduced its overall cracking capacity by about 5%, was also seeking naphtha for March delivery. However, details could not be confirmed.
The January crack is higher at – $ 4.65 / bbl.
Gasoline
Asia’s gasoline crack dived 26% to hit a 6-1/2 month low of $3.04 a barrel on Wednesday, as ample supplies and high feedstock oil prices could hurt demand.
The January crack is lower at $ 4.20 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil were at 39 cents per barrel over Singapore quotes on Wednesday, up from 37 cents a barrel on Tuesday.
Cash premiums for jet fuel fell to 4 cents per barrel to Singapore quotes on Wednesday, from 9 cents per barrel on Tuesday.
The January crack for 500 ppm Gasoil has firmed up to $ 13.20 /bbl with the 10 ppm crack at $ 14.00 / bbl. The regrade is at -$ 0.60 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month crack for 0.5% VLSFO time spread narrowed on Wednesday, while cash premiums for the marine fuel grade inched lower amid weaker buying interests for physical cargoes.
The January/February time spread traded at a premium of $16 per tonne on Wednesday, compared with $17.50 a day earlier.
The front-month VLSFO crack dropped $1.06 to $27.71 per barrel above Brent crude during Asian trade on Wednesday, but still within close sight of a record high of $29.35 per barrel hit last week.
Meanwhile, the 380-cst barge crack to Brent crude for February narrowed its discount to minus $23.94 per barrel on Wednesday, from minus $25.71 on Tuesday.
The January 180 cst crack has strengthened further to -$ 13.50 / bbl with the visco spread at $ 1.75 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for 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.