Oil prices fell nearly 2 percent on Thursday as investors focused on swelling global crude supply, which is increasing more quickly than many had expected. Brent crude futures settled $1.42 lower at $70.65 a barrel, the lowest since mid August. WTI crude futures fell $1.00 to settle at $60.67 a barrel, the lowest since March.
Fears of the potential supply glut dampened a rally early in the session driven by Chinese data that showed record oil imports. China’s crude imports rose to 9.61 million bpd in October, up 32 percent from a year earlier.
U.S. crude output reached a new record high of 11.6 million bpd in the latest week and the country has now overtaken Russia as the world’s largest oil producer. Even with U.S. sanctions on Iranian oil in place, investors believe there is more than enough supply to meet demand. Waivers granted to the sanctions intensify the market’s perception that sanctions may not limit crude supply as much as initially expected. To add to this, Russia has extended a lifeline to Iran in the form of purchasing Iranian crude for barter. This frees more Russian crude up for export!
Asia’s naphtha crack nosedived by 66 percent to a 26-month low of $12.48 a tonne on Thursday, pummelled by excess supplies and a very weak gasoline market.
Abu Dhabi National Oil Company and its buyers remained locked in negotiations over the renewal premiums of a 12-month contract starting January.
The November crack has dropped to – $ 8.80 / bbl
Asia’s gasoline margin to Brent crude moved into negative territory for the first time in more than 6-1/2 years at a discount of $1.17 a barrel. Ample supplies resulted in the crack value diving by 38 percent from the start of the week to 88 cents a barrel on Wednesday. This was the lowest gasoline crack value seen in Asia since September 2013.
Singapore’s onshore light distillates stocks eased 1.75 percent or 213 KB to a three-week low of 11.9 million barrels in the week to Wednesday. But this was still 11.2 percent higher versus the same period last year.
The November crack has improved nevertheless to $ 1.20 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash premiums for gasoil with 10ppm sulphur content continued easing to 35 cents a barrel to Singapore quotes on Thursday as compared to 53 cents a barrel on Wednesday.
Cash differentials for the aviation fuel narrowed their discounts to 33 cents a barrel to Singapore quotes on Thursday, compared with a 37-cent discount a day earlier.
Singapore’s onshore middle distillates stocks eased 1.75 percent or 213,000 barrels to a three-week low of 11.9
The November crack has jumped once again collapsed to up to $ 16.75 /bbl with the 10 ppm crack at $ 17.65 /bbl. The regrade is steady at $ 0.70 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Limited supplies of finished grade 380-cst high-sulphur fuel oil for prompt deliveries have led to a spike in ex-wharf and delivered premiums of the marine fuel this week. A lack of cutter stocks and the arrival of November arbitrage supplies only in the second half of the month have contributed to already tight Singapore fuel oil supplies, following limited arbitrage inflows in October.
380-cst fuel oil ex-wharf premiums climbed to about $17 per tonne to Singapore quotes this week for deliveries in the second-half of the month, and potentially even higher for earlier deliveries. Last week, ex-wharf premiums were trading at about $10-$12 per tonne to Singapore quotes. Ex-wharf premiums have typically traded in the low single-digit premiums for the most of 2018.
Singapore onshore fuel oil inventories rose 620,000 barrels (about 93,000 tonnes) to 16.076 million barrels, or 2.399 million tonnes.
The November 180 cst crack has eased to +$ 4.10 / bbl with the visco spread at $ 0.80 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Fuel Oil cracks seem to be easing off.
Yesterday’s spike in middle distillate cracks proved to be a flash in the pan. Cracks have returned to previous levels so quickly that we can close the hedges we laid on yesterday. This is the primary reason for hedging. To take advantage of windfall gains.
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.