Crude Oil
Oil prices fell more than 1% on Monday as U.S.-China trade tensions continued to threaten demand for crude. Brent crude futures settled $ 1.00 lower at $62.29 a barrel. WTI crude futures settled at $53.26 a barrel, down 73 cents.
U.S. President Donald Trump said he was ready to impose another round of punitive tariffs on Chinese imports if he does not reach a trade deal with China’s president at a Group of 20 summit later this month. China’s foreign ministry said that China is open for more trade talks with Washington but has nothing to announce about a possible meeting.
China’s crude oil imports slipped to around 40.23 million tonnes in May, from an all-time high of 43.73 million tonnes in April, customs data showed, due to a drop in Iranian imports caused by U.S. sanctions and refinery maintenance.
On the supply side, Saudi Energy Minister Khalid al-Falih said Russia was the only oil exporter still undecided on the need to extend the output deal agreed by top producers. Yet, Russian energy minister Alexander Novak said there is a still a risk that oil producers pump out too much crude and prices fall sharply.
Naphtha
Asia’s naphtha physical crack stayed at a discount for the third straight session after flipping into the negative zone last week for the first time in over a decade due to cracker outages and a weak economic outlook.
Benchmark open-specification naphtha margin was at a discount of $9.80 a tonne, narrower than discounts on Friday but wider than on Thursday.
LG Chem is expected to restart its Daesan cracker by June 18 or earlier after shutting the unit unexpectedly last week due to mechanical trouble. The cracker which has a capacity of close to 1.3 million tonnes of ethylene a year is the single largest existing unit in South Korea but this will be overtaken by Hanwha Total once the latter’s cracker resumes operations following expansion and maintenance works which started since end March. Two of South Korea’s largest crackers being offline at the same time have had a big impact as these came at a time when petrochemical makers were replacing some of their naphtha demand with cheaper LPG.
The June crack has improved to – $8.65 /bbl. The July crack is at -$7.65
Gasoline
Although gasoline crack was at a three-session high of $2.56 a barrel, this was down 72.6% from this year’s peak on April 12 at $9.35. Falling petrochemical margins were also not helping.
The June crack is higher at $ 5.05 /bbl. The July crack is at $ 5.60 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a discount of 19 cents a barrel to Singapore quotes, compared with a discount of 17 cents a barrel on Friday.
The June/July time spread was trading at a discount of 10 cents a barrel on Monday, as against a discount of 8 cents per barrel on Friday.
The gasoil market would likely remain under pressure as China’s domestic consumption has been dropping and the country is expected to export more, adding more barrels to the Asian supplies.
With the overall Asian refining margins trading lower, weighed down primarily by weaker cracks for lighter distillates, some regional refiners are planning run cuts and that might offer some help to tighten the markets.
Cash discounts for jet fuel widened to 22 cents a barrel to Singapore quotes on Monday, from 19 cents per barrel on Friday.
The June crack for 500 ppm Gasoil is lower at $ 12.25 /bbl with the 10 ppm crack at $ 12.95 / bbl. The regrade is at +$ 0.10 /bbl
The July crack for 500 ppm Gasoil is at $ 13.70 /bbl with the 10 ppm crack at $ 14.30 / bbl. The regrade is at +$ 0.10 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s cash premiums for mainstay 380-cst high-sulphur fuel oil dipped on Monday, but were still close to their highest level in three months, amid expectations for tighter near-term supplies.
Cash premiums for 380-cst high-sulphur fuel oil (HSFO) were at $3.05 a tonne to Singapore quotes, compared with $3.30 a tonne on Friday. The front-month time spread was trading at about $10.50 a tonne on Monday, up from $10 a tonne in the previous session.
Refining margins for the more actively traded 380-cst barge crack to Brent crude fell to minus $7.09 a barrel during Asian trading hours, down from minus $6.56 per barrel on Friday.
The June180 cst crack has dropped to – $ 0.60 / bbl with the visco spread at $ 1.25 /bbl.
The July180 cst crack is at – $ 0.15 / bbl with the visco spread at $ 1.35 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The FO cracks are slowly easing off.
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.