Crude Oil
After 8 trading days of optimistic buying, grim reality hit the market on Friday as prices fell dramatically. Brent lost $ 1.40 to settle at $ 46.71 / bbl while WTI lost $ 1.29 to settle at $ 44.23 / bbl.
Both crudes have now posted 6 weekly declines in the last seven weeks and there seems little hope for rebalancing under the current scenario unless we see an exceptional increase in demand as reining in supply seems to be getting tougher. The US add 7 rigs to drilling bringing the total count to 763, a level not seen since April 2015.
OPEC and non OPEC suppliers are scheduled to meet in Russia on July 24 to examine the possibility of rejigging the production cuts. While Russia has stated it is willing to make adjustments, some OPEC members have ruled out the possibility of further reduction in production.
Providing some respite to the supply glut is news that OPEC is considering a ceiling on the crude outputs of Libya and Nigeria which together are now producing ~380kb/d more than levels last October.
Technical Analysis
Technically, oscillators have changed direction in both daily and weekly charts. On the daily charts, crude settled just below the May low of $ 46.74. A two day close below this level would target last month’s low of $ 44.35. On the weekly charts too, crude settled just above a support at $ 46.53. Therefore, it would seem that we are in a zone of support which could help it form a bottom.
Immediately below this area, supports lie at around $ 44.35 and then $ 42.90 /bbl.
Resistances above are at $ 48.76 /bbl, $ 49.60-80 /bbl and then $ 51.04 /bbl
Naphtha
The sharp dip in crude prices have helped naphtha cracks to strengthen further while maintaining the contango in prices. Higher supplies due to refiners in parts of Asia maximizing run rates and high exports from the Middle East to Asia have persistently offset demand from North Asia, and are causing the intermonth contango to widen.
The July crack is stronger at -$0.25 /bbl
Gasoline
Gasoline cracks have also improved on account of strong inventory drawdowns in US, Singapore and ARA combined with decline in crude oil prices.
The July crack is higher at $ 11.20 /bbl
Distillates
Distillate cracks continue to ease as additional supplies from Europe are expected to reach Asia. Additional availability is also expected to come from refineries in South Korea and Japan where refiners are running their plants at near-maximum capacity to cash in on profit margins that are at high levels due to the recent spurt in demand.
The July gasoil crack is slightly lower at $ 13.00 /bbl while the July regrade is marginally higher at- $1.10 /bbl. With the Jet cracks relatively steady, it is volatility in the gasoil cracks that are causing the regrade to fluctuate quite a bit.
Fuel Oil
Fuel Oil cracks have managed to come back into positive territory even as news of cargoes moving from West to East are doing the rounds in the market. According to some traders, a VLCC carrying about 270,000 MT of fuel oil is expected to reach Singapore on 14 August later this month. This cargo belonging to Gunvor was loaded on 5 July from Rotterdam. Continuing robust demand and fall in crude prices are propping up cracks.
The July crack is now valued at $0.10 / bbl. The visco spread stays at $0.90 /bbl.
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.