Oil prices rose nearly 3% on Friday after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June. Brent crude futures settled at $63.29 a barrel, gaining $1.62. WTI crude futures settled at $53.99 a barrel, up $1.40.
Saudi Energy Minister Khalid al-Falih told a conference in Russia that OPEC and its allies should extend oil production cuts. He said that while OPEC was close to agreement, more talks were needed with non-OPEC countries that were part of the deal to reduce output by 1.2 mbpd, which runs out at the end of this month.
In the United States, energy firms this week reduced the oil rig count to the lowest since February 2018. Drillers cut 11 rigs in the biggest weekly decline since April, bringing the total count down to 789.
Oil prices were also supported by a rise in equity markets after a sharp slowdown in U.S. job growth raised hopes of an interest rate cut by the Federal Reserve. The United States has also threatened tariffs on goods from major trading partner Mexico. U.S. President Donald Trump said on Friday there was a “good chance” the United States would make a trade deal with Mexico, but that if the two countries failed to make an agreement a 5% tariff would be imposed on Mexican imports on Monday. Because of weak economic data and the widening trade conflict, Commerzbank revised their third-quarter forecast for Brent down to $66 from $73 a barrel.
Hedge funds and other money managers cut their net long U.S. crude positions last week as prices plunged.
Asia’s naphtha physical crack extended losses on Friday to reach its lowest in more than a decade as cracker outages depressed demand for naphtha. The benchmark open-specification naphtha margin had flipped into a discount on Thursday for the first time since January 2009. On Friday it went deeper into discount, of $15.38 a tonne, its lowest level since December 2008.
The current weakness is due mainly to the unexpected shutdown of a large-scale unit in South Korea which produces more than 1 million tonnes a year of ethylene, a building block for plastics. Another unit in South Korea, which produces 1 million tonnes a year of ethylene, was shut down for longer than expected following a planned maintenance which started at the end of March. It could not be immediately confirmed if either unit has resumed production. Just weeks ago, Japan’s Mitsui Chemicals also unexpectedly shut its cracker following a glitch but the unit has since restarted.
Other factors dragging the naphtha market down included recent lacklustre gasoline demand in the United States and ready supplies of cheaper alternative LPG supplies.
The June crack has further dropped to – $9.55 /bbl;
Asia’s gasoline crack rose to a two-session high of $2.45 a barrel but it was nearly 62 percent lower than a year ago due to high stockpiles across key regions. Light Distillate stocks in ARA surged almost 29% in the week to Thursday to a three-month high of 1.08 million tonnes, data from Dutch consultancy Insights Global showed.
The June crack is higher at $ 4.15 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash differentials for 10ppm gasoil widened their discounts by 2 cents to 17 cents a barrel to Singapore quotes on Friday.
Gasoil stocks in ARA fell by by 66 KT to 2.74 million tonnes.
Cash differentials for jet fuel were at a discount of 19 cents a barrel to Singapore quotes on Friday, compared with a 6 cent discount on Thursday.
The June crack for 500 ppm Gasoil has improved to $ 12.35 /bbl with the 10 ppm crack at $ 13.05 / bbl. The regrade is at +$ 0.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel oil refining margins gained on Friday despite firmer crude prices, while cash premiums for mainstay 380-cst fuel oil climbed to their highest levels in three months.
Cash premiums for 380-cst fuel oil were at $3.30 a tonne to Singapore quotes, a level not seen since March 6. Premiums stood at $2.89 per tonne on Thursday.
The 380-cst barge crack to Brent crude for July was at minus $5.70 a barrel during Asian trading hours, compared with minus $6.36 a barrel on Thursday.
Asia’s 180-cst fuel oil crack to Dubai crude rose to $1.43 a barrel on Friday, up from 20 cents per barrel on Thursday.
Fuel Oil stocks in ARA fell by 31 KT to 1.06 million tonnes.
The June180 cst crack has dropped to – $ 0.05 / bbl with the visco spread at $ 1.70 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
The FO cracks are slowly easing off.
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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.