Crude Oil prices moved in mixed directions as local supply considerations trumped global directions. Brent crude futures lost 28cents to settle at $77.11 a barrel. U.S. crude futures, however, gained 86 cents to settle at $73.80 a barrel.
For the week, Brent shed around 2.9% while WTI lost a mere 0.5%.
The coming week will see how the trade war between the US and China unfolds as the markets get set for uncertainty. Iran has stated that neither its production nor its exports have reduced.
The number of active rigs in the US rose by 5 to 863 last weeks as per the Baker Hughes Rig report.
Last week was a shortish week with one holiday. We also had a relatively short candle with a range of just $ 2.59 between low and high. What characterized the week was an open sharply below the close of the previous week which was never reached during the last week.
This was in line with our estimates of the previous week that the high price was unlikely to sustain at these levels due to lack of momentum.
The price action of the previous week suggests that the period of consolidation may be longer than expected. Momentum indicators are still showing indications of a possible reversal. However, observers of price action per se would have seen that the market is far more agressive going up than it is on the descent. This is clearly visible on shorter term charts (15 minutes – 30 minutes). Further, the support at the 50 dma held nicely last week inspite of intense selling pressure.
In the last week we had suggested going long near the $ 77 range with a stop below $ 76 /bbl. We are therefore currently long. We would recommend holding this length, with a stop below last week’s low. With the 50 dma now at $ 76.58, we expect this level to hold.
Supports and Resistances
Supports appear at $ 76.60 and then $ 76.40-50 area. The next support is a little far away at $ 75.50-60 area.
Resistances would appear to be first around $ 77.50, then around $ 78.80-79.00 with the $ 80.50 swing high of this rather long upmove expected to hold prices for this week at least.
Asia’s naphtha crack eased from a one-month high to a two-session low of $87.90 a tonne on Friday but spot premiums were mostly stable after having fallen sharply recently.
The July crack has dropped to -$ 1.15 / bbl. The August crack is at -$0.90 /bbl
Asia’s gasoline crack rose above $4 in about a week to reach $4.42 a barrel, its highest since June 26 as demand for gasoline across key regions of Europe could have given the crack some support.
The July crack has jumped to $ 7.45 / bbl. The August crack is at $ 8.10 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash differentials for jet fuel were at their higher in over a month on Friday. The differentials were at a discount of 3 cents a barrel to Singapore quotes, compared with a discount of 20 cents on Thursday. The prompt-month spread for jet fuel, which flipped into backwardation on Thursday for the first time in nearly two weeks, widened on Friday.
Meanwhile, cash discounts for gasoil with 10ppm sulphur content narrowed discounts, and were at a discount of 16 cents a barrel to Singapore quotes, compared with a discount of 21 cents on Thursday.
The July crack is higher at $ 13.10 / bbl with the 10 ppm crack at $ 13.95 /bbl. The regrade is steady at $ 1.50 /bbl.
The August crack is at $ 13.70 / bbl with the 10 ppm crack at $ 14.60 /bbl. The regrade is at $ 1.25 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s fuel oil market edged up on Friday with the 380-cst Aug/Sept time spread and the front-month 380-cst barge crack to Brent crude trading higher. Weaker crude oil prices on Friday contributed to the narrowing fuel oil discount to Brent crude. For the week, the fuel oil market ended lower, retreating from the multi-year highs seen in the previous week. Some said that last week’s multi-year highs in cash premiums and front-month time spreads were unreasonable and that a correction was inevitable; prices in the fuel oil market were now nearer to sustainable levels, given current bullish market fundamentals.
The July crack is stronger at -$ 1.80/ bbl with the visco spread at $ 1.15 /bbl
The August crack is at -$ 2.10/ bbl with the visco spread at $ 1.25 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
As the Calendar 19 Jet and Gasoil cracks are weakening, we have achieved target on two more of our hedges. While technically, we should keep tracking the position as a composite, in the interest of making monitoring easier for us, we are taking them off since the point of the hedge has been made.
For now the August regrade looks very interesting at $ 1.25 / bbl. However, since the jet market appears very strong, we shall wait and see if we get one more day of further improvement which we shall then hedge. This is, strictly speaking, a market call which should not be made while hedging.
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.
Click Here to see how all our recommendations have fared
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.