Crude Oil
Oil futures jumped this morning after dipping yesterday as the US announced its exit from the international nuclear deal with Iran. Yesterday, Brent futures settled $1.32 lower at $74.85 /bbl while U.S. crude futures gave up $1.67 to settle at $ 69.07 /bbl.
This morning though, prices have jumped back up to levels of Monday close with Brent trading at $76.65 at the time of writing.
Walking away from the deal means that the United States will likely re-impose sanctions against Iran after 180 days, unless some other agreement is reached before then. Iran’s exports of oil to Asia and Europe will almost certainly decline later this year and into 2019 as some nations seek alternatives in order to avoid trouble with Washington and as sanctions start to bite.
Despite this, it is not yet clear, how strongly global oil markets will be affected. The United States buys no Iranian oil, while the other signatories of the agreement, Russia, Britain, France and Germany, are opposed to ending the agreement, and may continue to buy Iranian crude. Asia, by far the biggest importer of oil from Iran, will likely continue to take in some supplies as well, as it did during the previous round of sanctions.
Iran’s President Hassan Rouhani said his foreign ministry will begin talks with those countries to see how the deal can be made to work. His sentiments were echoed by French President Emmanuel Macron, who said on Twitter that “we will work collectively on a broader framework, covering nuclear activity, the post-2025 period, ballistic activity and stability in the Middle East”.
In addition, Saudi Arabia has promised to work with other OPEC members to “mitigate” the impact of the US decision on the oil markets. Given that the new sanctions are estimated to disrupt up to 1 mb/d of Iranian crude, this could potentially allow Saudi Arabia or other members of the cartel to fill the gap.
API Data
The API reported significant draws all around which would be extremely bullish for the market. However, the impact of this data is likely to be lost in the bigger news of the US withdrawal from Iran. The continued depletion of distillate stocks remains a cause for concern.
Naphtha
Asia’s naphtha crack rose for a fourth session to settle at $ 100.55 /MT on Tuesday as supplies for June remained tight. Cargoes arriving into Asia in June estimated at 1.1 million tonnes, significantly below the average of 1.4 Million tonnes per month being seen for this year so far.
The crack for balance May is has moved into positive territory and is now valued at $ 0.15 / bbl.
Gasoline
Asia’s gasoline crack dropped further on Tuesday to settle at $ 5.95 /bbl, the lowest in two weeks as the situation about supplies remains unclear.
The balance May crack has has surprisingly jumped to $ 9.85 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for jet fuel slipped on Tuesday, while the prompt month spread narrowed its backwardated structure. Cash premiums for jet fuel dropped to 97 cents a barrel to Singapore quotes, compared with $1.01 a barrel on Monday.
Cash premiums for gasoil with 10 ppm sulphur content fell to 39 cents a barrel to Singapore quotes, on the back of a weaker deal on Tuesday. The premiums were at 43 cents a barrel a day earlier.
The balance May crack has improved to $ 15.20 / bbl with the 10 ppm crack quoting at $ 15.95/bbl. The regrade is valued at $ 0.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash premiums for Asia’s 180-cst high-sulphur fuel oil edged higher on Tuesday, moving away from a near three-week low in the previous session, amid active trade of physical cargoes of the fuel in the Singapore trading window. Despite the elevated physical trade volumes, the Singapore fuel oil market was still facing shortages of blend-stock material and ample supplies of high-viscosity, high-density fuel oil.
The May 180 cst crack is marginally better at -$ 6.10 / bbl. The visco spread is slightly wider at $ 1.60/bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Jet and 10 ppm gasoil have both crossed $ 20 //bbl for cal 2019. Since we already have a significant jet exposure but next to no exposure in 10 ppm gasoil, we will recommend hedge a little of this commodity at today’s value of $ 20.10 /bbl
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.