Crude prices edged higher on Thursday, supported by comments from the U.S. Federal Reserve chairman that lifted equity markets. Brent crude futures rose 24 cents to settle at $61.68 a barrel. WTI crude futures rose 23 cents to settle at $52.59 a barrel.
Both Brent and WTI have posted a 9 day winning streak now, a phenomenon not since since September 2007 for Brent and 2010 for WTI.
Having said that, the rally appears to slowed as optimism surrounding U.S.-China trade talks faded. Global financial markets have climbed recently on hopes that Washington and Beijing would avert an all-out trade war. The two superpowers concluded three days of talks on Wednesday. But the rise in global markets began to dwindle after the world’s two largest economies issued vaguely positive statements that lacked concrete details. Some officials from China are expected to visit Washington later this month.
Comments by Federal Reserve Chairman Jerome Powell on Thursday helped boost riskier asset classes, including oil, late in the session. Powell said the U.S. central bank had the ability to be patient on policy, but that the Fed would shed significantly more assets than it already has. U.S. equity markets broadly rose after the comments but then tapered off in the face of other data suggesting economic slowdown. For instance, Ford and Jaguar Land Rover unveiled sweeping job cuts across Europe on Thursday as carmakers struggle with a slump in demand for diesel vehicles, tougher emissions rules and a global economic slowdown led by China.
In a situation not of their own making, Asia’s refiners appear to be caught between the OPEC+ moves to boost oil prices, and Trump’s Twitter onslaught aimed at keeping them low.
Asia’s naphtha crack edged up 87 cents to a two-session high of $35.48 a tonne. Demand for the petrochemical feedstock this week has been firm, with at least seven end users having scooped up at least 180,000 tonnes of naphtha for second-half February to first-half March delivery. The amount of naphtha arriving in Asia from the West is set to fall to a four-month low in February at 1.4 million tonnes, offering some respite to local traders after months of surplus supplies.
The January crack has dropped to -$ 5.40 /bbl
Asia’s gasoline crack remained at a discount for the second straight day as high supplies weighed, at 22 cents a barrel on Thursday versus 37 cents in the previous session.
Supplies in Asia are high but some traders were hoping that refinery maintenance would help remove some of the surplus. China National Offshore Oil Company (CNOOC) will shut its 240,000 barrel-per-day refinery in southern China’s Huizhou city for a planned overhaul that lasts about 50 days, starting late February.
The January crack has dropped to $ 1.00 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash differentials for 10ppm gasoil narrowed to 39 cents a barrel to Singapore quotes, from a discount of 45 cents a barrel on Wednesday. The cash discounts have more than halved over the last two weeks after plunging to a 98-cents per barrel discount on Dec. 26.
The January/February spread for 10ppm gasoil narrowed by 6 cents to a discount of 35 cents a barrel on Thursday. But the gasoil market has improved over the last two weeks as supplies have come down slightly with refiners churning out less gasoil than jet fuel at the moment as there is a moderately steady demand from the aviation sector.
Asia Pacific airlines’ passenger traffic climbed 6 percent in November compared to the year-ago period, up from 5.7 percent growth in October, the International Air Transport Association (IATA) said in a statement on Wednesday.
Another factor helping the gasoil market tighten is a stronger regrade, the price spread between jet and gasoil, which is allowing refiners to produce more of the aviation fuel than gasoil despite the wide discounts at which jet is being sold currently. The regrade, which is currently at its strongest levels for this time of the year was at $1.90 a barrel on Thursday. The overall market structure for middle distillates might change if the regrade starts narrowing.
Cash discounts for jet fuel narrowed by a cent to $1.30 a barrel to Singapore quotes on Thursday.
The January crack has dropped to $ 13.75 /bbl with the 10 ppm crack at $ 14.70 /bbl. The regrade is steady at $ 1.45 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
The price differential of the front-month 180-cst fuel oil crack narrowed its discount to Dubai crude to near parity on Thursday in spite of sharp gains in crude oil prices this week.
The February 180-cst fuel oil crack to Dubai crude was at minus 3 cents a barrel on Thursday, up from minus 20 cents a barrel in the previous session.
However, the more actively traded 380-cst barge crack to Brent crude for February slipped to minus $6.07 a barrel on Thursday, down from minus $5.32 a barrel on Wednesday.
The January 180 cst crack has improved to $ 0.10 / bbl with the visco spread at $ 0.55 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Nothing fresh came up yesterday for consideration. We are monitoring FO cracks and Cal 20 middle distillates basically for hedging opportunities. Any hedges to be entered in today will be updated later.
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.