Crude Oil
Oil prices ended more than 2 percent higher on Friday after OPEC members and allies like Russia agreed to reduce output to drain global fuel inventories and support the market. Brent crude oil rose $ 1.61 cents to settle at $61.67 / bbl. U.S. crude rose $ 1.12 to settle at $52.61 a barrel.
For the week, Brent rose around 5% while WTI gained 3.3%. Gains were capped by concerns that the cuts would not offset growing production.
The “OPEC+,” group agreed to slash production by a combined 1.2 million barrels per day next year in a move to be reviewed at a meeting in April. This was larger than the minimum 1 million bpd that the market had expected, despite pressure from U.S. President Donald Trump to reduce the price of crude. OPEC will curb output by 800 kbpd from January while non-OPEC allies contribute an additional 400 kbpd of cuts, Iraqi Oil Minister Thamer Ghadhban said after the organization concluded two days of talks in Vienna.
The deal had hung in the balance for two days first on fears that Russia would cut too little, and later on concerns that Iran, whose crude exports have been depleted by U.S. sanctions, would receive no exemption and block the agreement. But after hours of talks Russia gave a commitment to reduce output by 228 kbpd from October levels of 11.4 million bpd, though it said the cuts would be gradual and take place over several months.
U.S. drillers this week cut oil rigs by the most in over two years, after adding rigs in recent weeks. The rig count, an indicator of future production, fell by 10 oil rigs in the week to Dec. 7, the biggest weekly decline since May 2016. Still, at 877, the count was higher than a year ago when 751 rigs were active.
In the meanwhile, China’s imports of crude oil hit a fresh monthly high in November, customs data showed on Saturday, beating the record set in October on heavy buying from private refiners and trial starts of new mega-refineries. We are of the opinion that high Fuel Oil and Gasoil cracks would have encouraged the tea pot refineries to refine more and this could reduce the pressure on these products over the next couple of months.
Naphtha
Naphtha inventories held independently at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub fell 7 percent to a two-week low of 240 KT in the week to Dec. 6. Compared with year-ago levels, ARA naphtha inventories were 21 percent lower while gasoline stocks were 11 percent higher in the week to Dec. 6.
The December crack has improved to -$ 4.10 /bbl
Gasoline
Asia’s gasoline crack flipped back into positive territory against Brent crude on Friday, supported by tumbling crude oil prices but concerns over ample near-term supplies continued to weigh on market sentiment. The Singapore 92 RON gasoline crack rose to 5 cents a barrel above Brent crude, up from minus $1.03 a barrel on Thursday, its highest premium since Friday last week.
ARA gasoline inventories were little changed in the week to Dec. 6, down 1 percent from the week before to a three-week low of 968 KT.
The December crack has eased to $ 1.65 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
The Asian gasoil cash differentials slipped on Friday but margins for the industrial fuel rebounded, even though the product was being stored in tankers off Taiwan and Southeast Asian waters. About seven to nine long-range tankers carrying about 5 million to 7 million barrels of diesel are floating off Taiwan largely due to a drop in bunker fuel demand from the South China Sea.
ARA gasoil stocks slipped marginally to 2 million tonnes in the week to Dec. 6.
The December crack has improved to $ 12.15 /bbl with the 10 ppm crack at $ 13.90 /bbl. The regrade is steady at $ 2.10 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s prompt-month 380-cst fuel oil (HSFO) time spread and cash premium fell on Friday as physical trade activity fizzled in the Singapore trading window following a week of intense buying appetite for cargoes of the fuel.
Rising fuel oil inventories in Singapore and ARA this week also helped dampen market sentiment.
The 380-cst fuel oil cash premium slipped to $5.65 a tonne to Singapore quotes, down from $5.95 a tonne in the previous session. Similarly, the 380-cst Dec/Jan time spread slipped to around $8 per tonne on Friday, down from about $8.75 a tonne in the previous session.
ARA fuel oil inventories rose by 167 KT to 1.07 million tonnes in the week ended Dec. 6.
The December 180 cst crack has dropped to +$ 1.15 / bbl with the visco spread at $ 0.55 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The regrade remains continues to remain strong which FO cracks are going on easing. No fresh positions 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.
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.