Crude Oil
Oil prices were steady on Friday, with U.S. crude slipping on weak global equity markets while Brent inched up on geopolitical factors, including violent protests in Iraq. U.S. Brent crude futures settled up 33 cents at $76.83 a barrel. WTI crude futures settled down 2 cents at $67.75 per barrel.
For the week, U.S. crude lost almost 3 percent, while Brent was down 0.8 percent.
Speculators raised their bullish bets on U.S. crude to the highest in a month in the week to Sept. 4, as per CFTC reports.
Iraq’s oil minister said the country’s output remains at around 4.36 mb/d and is unaffected by protests. This comes even after protestors entered a 400kbd Lukoil refinery and held two staff members hostage last week. Lukoil has announced that its employees are no longer in danger and that the protestors have left West Qurna-2 without leaving damage.
The U.S. rig count, an indicator of future output, fell by 2 to 860 in the week to Sept. 7. U.S. energy companies cut rigs for the second week in three.
10 Sep 2018
Last week, prices started with a bang, moving furiously higher and almost breaching the high of $ 79.51 we mentioned in our previous report. But that move fizzled out on that day itself when it actually closed in the red. Prices continued to weaken over the next couple of days before some weekend covering helped shore up prices to yield what could almost be described as a spinning top. This movement is but a reflection of the uncertainty which continues to plague the market.
The oscillators continue to all show signs of being overbought with the exception of the MACD in the weeklies which seems poised to cross over from below.
Trading Strategy
The last week, we had recommend staying short and adding to shorts above $ 78.50 with a stop above $ 79.00 targeting $75.25 first and then $ 74.50. Only the reckless would have not got stopped out of that short. The longs would hopefully have got out near $78.50 for a handsome profit.
This week we would again recommend trying to go short in the $ 78.75 – $ 79.00 area with a stop above last week’s high to target the 100 DMA of $75.50.
Supports and Resistances
The first support comes $ 76.65-76.75. The next support is the 100 DMA around $75.50-75 area followed by the 50 DMA which is at $ 74.65-75 area.
Resistances appear to be in $77.25 – $77.35 area, then in the $ 77.65-77.75 area and then in the $ 78.25-50 area.
For bigger charts, please see our Technical Views page
Naphtha
Asia’s naphtha crack fell for a third straight session on Friday, down 0.7 percent, and ended at a two-month low of $92.10 a tonne as excess supplies weighed.
Unusual spot sales from Abu Dhabi and offers from Egypt this week came at a time of cracker maintenance season in pockets of Asia including Singapore, Japan and South Korea.
Adding to the weak fundamentals were cargoes arriving this month from the West including Europe and the Mediterranean. which could easily go beyond 1.4 million tonnes, a lot more than what Asia needs.
The balance September crack is higher at -$ 0.50 /bbl. The October crack is at $ 0.15 /bbl
Gasoline
Asia’s gasoline crack was at a three-session high of $8.53 a barrel, but it has lost some 34 percent of its value from the same time last year.
Although gasoline stocks in Singapore in the week to Thursday had fallen to a two-month low of 13 million barrels, weekly inventories in the U.S. and Europe had risen.
ARA Gasoline stocks rose 15% to reach a 3 week high of 870 KT in the week to Sept. 6.
The balance September crack is higher at $ 10.05 /bbl. The October crack is at $ 9.20 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for jet fuel narrowed to 31 cents a barrel to Singapore quotes, compared with a 36 cents a barrel discount on Thursday.
Meanwhile, cash premiums for 10ppm gasoil rose to 59 cents a barrel to Singapore quotes, a record high. The premiums were at 44 cents a barrel on Thursday.
Persistent demand, and some upcoming planned refinery turnarounds would keep gasoil margins well supported at least over the next couple of months.
Gasoil stocks in ARA climbed 4.2 percent in the week to Thursday to 2.5 million tonnes. Jet fuel inventories rose 8.4 percent to 734,000 tonnes.
The balance September crack has fallen to $ 15.65 / bbl with the 10 ppm crack at $ 16.40 /bbl. The regrade is higher at – $ 0.60 /bbl.
The October crack is at $ 15.50 / bbl with the 10 ppm crack at $ 16.30 /bbl. The regrade is at – $ 0.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst barge crack bounced back on Friday after steep losses that started in mid-August as declining peak summer demand was set to ease supply tightness. The October 380-cst barge crack to Brent crude was trading at minus $11.20 a barrel on Friday, up from about minus $12.15 a barrel in the previous session. The front-month barge crack sank to a more than three-month low of minus $12.08 a barrel on Wednesday. On Aug. 1, the front month barge crack was at a more than 10-month high of minus $6.84 a barrel.
Fuel Oil stocks in ARA jumped 23 percent, or 234,000 tonnes, to a six-week high of 1.262 million tonnes in the week ended Sept. 6.
The balance September180 cst crack continues its recovery and is now at -$ 4.90 / bbl with the visco spread at $ 0.80 /bbl.
The October 180 cst crack is at -$ 4.70 / bbl with the visco spread at $ 1.00 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to report 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.