Yesterday, we had remarked that crude will be hard pressed to continue its upward momentum. However, we must admit that even we didn’t expect that it would retreat in the manner it did yesterday. Brent lost $2.16 to close at $ 54.94/bbl while WTI lost $ 2.03 to close at $ 51.96 /bbl.
The reasons given for this drop are manifold. Some of them are
- The US expects a mild winter in January reducing demand for heating. Natural Gas lost around 5% and the Crude Markets reacted in sympathy.
- Iraq exported a record 4.03 Million barrels in December. While the Iraqis issued a statement that they will adhere to the production cuts, the transmission of reduction in production to reduction in supply doesn’t seem to be taking place.
- Russia is reported to have cut its production by 100 Kbd. People following the markets will recall that Russia had promised to cut production by 600 Kbd.
- Shale Oil production and supply is expected to increase. Further, hedging by Shale Oil producers is also likely to dampen the market.
All in all, there appear to be more reasons why crude will go down than it will go up.
Physical Naphtha continued to grow in strength as supplies in February appear significantly less than the demand for material. The February crack is showing a value of of around $ 0.90 / bbl.
We would recommend commencing hedging February at these levels as also March should one obtain a positive bid for the crack.
The Gasoline market continues to drop. The February crack is showing a value of $ 11.7/bbl
Cold weather in Europe could increase demand for gasoil out of Asia. In the east, there has been significant buying of jet cargoes at decreasing discounts to markets. However, only the regrade has shown a mild appreciation in price yesterday. The February gasoil crack is showing a value of around $11.35 /bbl The Regrade is valued at $ 0.60 /bbl
Fuel Oil continues to remain strong as traders anticipate good demand ahead of the Chinese New Year. The February crack is being valued at -$ 1.3 /bbl while March is at -$ 1.9 /bbl. This is a bit lower than the previous day.
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.
Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity