Crude Oil
Oil prices rose about 1% on Tuesday, up from 13-month lows as the number of new coronavirus cases slowed in China. Brent futures rose 74 cents to settle at $54.01 a barrel. WTI crude futures rose 37 cents to settle at $49.94 a barrel.
The death toll from the COVID-19 in mainland China rose to 1,114 (+97 DoD) at the end of Tuesday. Across China, the total number of confirmed infections was 44,726 (+2,018 DoD).
The virus has already dented demand in the world’s second-largest oil consumer. Chinese state refiners plan to cut as much as 940 kbpd – almost 1% of world demand – from their crude processing rates in February. However, the outbreak in China may be over by Apr’20, the country’s senior medical adviser said on Tuesday, and the latest numbers of new cases may further feed that optimism.
The U.S. Energy Information Administration cut its global oil demand growth forecast for this year by 310 kbpd after the coronavirus outbreak. Oil also got a boost from a rally in world equities, which resumed their climb towards record highs on Tuesday on hopes the virus is peaking.
api data
Oil prices pared gains in post-settlement trade after data from industry group American Petroleum Institute showed a bigger-than-expected build in U.S. crude stockpiles. The draw in distillate stocks continues to be a possible source of crude demand. The U.S. government crude supply report is due on Wednesday.
Naphtha
Asia’s naphtha crack rose to a near one-month high of $94.88 a tonnes due to squeezed supply caused by refinery maintenance in the Middle East.
Middle East naphtha exports for February assessed at 2.1-2.2. million tonnes are down from January’s estimates at 2.5-2.6 million tonnes. Lower Middle Eastern supplies currently have overshadowed a weak petrochemicals market as China grapples with a health crisis cause by the fast-spreading Covid 19 virus.
The March crack has dropped to – $ 1.75 / bbl.
Gasoline
Asia’s gasoline crack rose for the fourth straight session on Tuesday to hover near a three-month high of $9.35 a barrel, as heavy refinery run cuts in China drove the value higher.
As China is the top supplier of petrol to Asia, the amount of cargoes it can export in a month will impact the market. However, it was not yet clear what would be its total February shipments. In December, China exported some 1.73 million tonnes of gasoline. China’s January exports were seen at least 400 KT lower than December.
Strong demand for petrol from India was also lending support to the market as refiners in the country had been upgrading their refineries since last year to produce fuels that are of Bharat VI standard.
The March crack has dropped to $9.25 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for gasoil with 10 ppm sulphur content were at 73 cents per barrel to Singapore quotes, compared with 62 cents a barrel on Monday.
Cash differentials for jet fuel were at a premium of 3 cents a barrel to Singapore quotes, compared with a 5-cent premium on Monday.
The March crack for 500 ppm Gasoil has improved to $12.15 /bbl with the 10 ppm crack at $ 12.80 / bbl. The regrade is at -$ 2.15 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash premiums for cargoes of Asia’s 0.5% VLSFO slipped to a near two-month low on Tuesday amid sluggish demand for the marine fuel. VLSFO cash premiums dropped to $3.04 per tonne, the lowest since Dec. 13, down from $3.31 a tonne in the previous session.
The lower cash premiums came as trade activity for cargoes of the fuel returned to the Singapore trading window after a near month-long absence. One 0.5% VLSFO cargo trade was reported in the Singapore trading window, for the first time since Jan. 13.
The March 180 cst crack has jumped to -$ 8.60/ bbl with the visco spread at $ 1.20 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for today. However, the FO crack has improved dramatically from very low levels. We will put in a hedge for 180 cst crack for 2Q20 at today’s level of -$8.95 /bbl. This is a true ‘hedge’ given the recovery of this crack from its lows.
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.