Global benchmark Brent crude oil had its biggest one-day drop in two years on Wednesday as a number of factors emerged to mitigate tensions about reduced supply. Brent crude fell $5.46, or 6.9 percent, to settle at $73.40 a barrel. The decline was the largest one-day move on a percentage basis since Feb. 9, 2016. U.S. crude fell $3.73, or 5 percent, to $70.38 a barrel.
Tripoli-based Libya National Oil Corp said on Wednesday four export terminals were being reopened after eastern factions handed over the ports, ending a standoff that had shut down most of Libya’s oil output. This news triggered sell-off . With Canada already having announced that the pipeline would resume before the end of July, this acted as a major trigger. The sell-off intensified after news of a fall in U.S. crude oil inventories failed to reverse market sentiment.
Trade tensions between the U.S. and China raised additional concerns about demand. The specter of tariffs on a further $200 billion of Chinese goods sent commodities lower, along with stock markets, as tension between the world’s biggest economies intensified.
Crude oil prices also fell as the U.S. dollar rose on Wednesday’ssurprisingly strong U.S. inflation report, which increased prospects the Federal Reserve will raise interest rates twice more this year. Prices this morning are over $ 1 /bbl higher as Asia does some profit booking on the short side.
U.S. crude inventories fell 12.6 million barrels, the largest stock draw seen since September 2016. This fall is mainly attributable to a sharp decline in imports of over 1.5 mb/d. Product demand for both gasoline and distillates was significantly lower and the gasoline draw appears attributable to a sharp increase in exports. Note though that the material balance statement suggests a build in gasoline stocks. The low gasoline demand appears to be really worrying as the driving season is now arguably in full swing.
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Asia’s naphtha crack edged up 2.2 percent to $92.18 a tonne on Wednesday, registering a five-week high for the third day in a row due to firm demand.
Analysts forecast that U.S. stockpiles of gasoline fell by about 800,000 barrels last week. U.S. gasoline inventories had fallen by 1.5 million barrels in the week ended June 29. Automobile sales in China rose 4.8 percent in June from a year earlier to 2.27 million vehicles as demand remained strong.
The July crack is higher at -$ 0.70 / bbl. The August crack is at -$ 0.45 /bbl
Asia’s gasoline crack rose for the fourth straight session to a three-week high of $5.29 a barrel, although this lagged margins above $10 for the same period last year. Automobile sales in China rose 4.8 percent in June from a year earlier to 2.27 million vehicles as demand remained strong.
Light distillates inventories in the Fujairah Oil Industry Zone (FOIZ) fell over 20% percent from a week ago to 6.1 million barrels in the week ended July 9. Compared with year-ago levels, the weekly Fujairah middle distillate inventories were more or less the same.
The July crack has further improved to $ 8.75 / bbl. The August crack is at $ 9.40 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash differentials for gasoil with 10ppm sulphur content widened their discounts on Wednesday, while cash premiums for jet fuel rose to their highest levels in more than a month.
Cash discounts for 10ppm gasoil were at 23 cents a barrel to Singapore quotes, compared with a discount of 18 cents on Tuesday.
More shipments of gasoil cargoes towards the west are expected in the near-term thanks to the wide gasoil price spread between east and west, and that in turn should boost the market fundamentals for the industrial fuel.
Meanwhile, cash premiums for jet fuel rose to 16 cents a barrel to Singapore quotes as the prompt month spread widened its backwardated structure.
Middle distillates inventories in the Fujairah Oil Industry Zone (FOIZ) fell 12.5 percent from a week ago to 2.92 million barrels in the week ended July 9. Compared with year-ago levels, the weekly Fujairah middle distillate inventories were about 16 percent lower.
The July crack is lower at $ 12.90 / bbl with the 10 ppm crack at $ 13.80 /bbl. The regrade is lower at $ 1.50 /bbl.
The August crack is at $ 13.50 / bbl with the 10 ppm crack at $ 14.40 /bbl. The regrade is at $ 1.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
The front-month East-West arbitrage spread on Wednesday held at an eight-month high reached in the previous session amid ongoing concerns about supply shortages in the near term. Total fuel oil flows into East Asia for July are expected to be close to June’s eight-month low of 5.5 -5.6 million tonnes, as Western arbitrage flows stayed low under 3 million tonnes for a second consecutive month. Western arbitrage arrivals in August were expected to be similarly low, with 1.9 -2.0 million tonnes assessed so far, with no uptick seen in tanker-fixing activity despite stronger Asian benchmarks.
Fuel oil inventories at the Fujairah Oil Industry Zone (FOIZ) rose for a third straight week, climbing 8 percent, or 769,000 barrels (about 115,000 tonnes), to a 2018 high of 9.9 million barrels (1.478 million tonnes) in the week ended July 9. Compared with the same time last year, Fujairah fuel oil inventories were 18 percent lower.
The July crack is higher at -$ 1.25/ bbl with the visco spread down to $ 1.00 /bbl
The August crack is much higher at -$ 1.75/ bbl with the visco spread at $ 1.20 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
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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.