Oil prices slumped to more than two-week lows on Thursday as global stock markets fell, with investor sentiment made more bearish by a bigger-than-expected build in U.S. crude inventories. Brent crude futures fell $2.83 to settle at $80.26 a barrel. WTI crude futures fell $2.20 to settle at $70.97 a barrel.
During the day, Brent hit a low of $79.80, its weakest since Sept. 24.
On Wednesday, U.S. stock markets tumbled, with the S&P 500 and the Dow Industrials indexes posting their worst day in eight months, as solid economic data reinforced expectations of multiple interest rate hikes over the next year.
The OPEC cut its forecast of global demand growth for oil next year for a third straight month, citing headwinds facing the broader economy from trade disputes and volatile emerging markets. OPEC sees the oil market as well supplied and is wary of creating a glut next year. OPEC also pumped 130 kb/d more crude in September, taking cumulative gains since May to 580 kb/d, according to its Monthly Oil Market Report. Most of the gains have come from Saudi Arabia, where Sep output was 10.51 mb/d.
30 of the 89 platforms shut down due to Hurricane Michael have resumed operations according to the BSEE.
The DOE, like the API has reported a massive build of close to 6 million barrels of crude stocks. While this is not as large as the build reported by the API, it is more than double the market expectations. Gasoline stocks have also built and continue to remain at seasonal highs. Distillate stocks drew, but not as much as reported by the API.
It is difficult to figure out what has caused the build in crude stocks. As per the material balance statement, while production has increased marginally, and demand for crude has decreased, the decrease in net imports of close to 1.5 million barrels per day should have resulted in a big draw. So either we are slated for a big draw next week or crude stocks have been consistently under reported previous.
The gasoline build too is difficult to explain given a net material balance shortfall of around 450 kb/d. The distillate draw appears to have been caused by a strong increase in demand.
Detailed graphs of US stocks are available at our US DOE Data page.
Asia’s naphtha crack edged up 0.4 percent to $79.60 a tonne on Thursday, lifted by easing oil prices. Supplies remained high and could continue to build as weak demand for light fuels in Europe may push more naphtha to Asia.
The balance October crack has fallen to -$ 3.55 /bbl.
The November crack is at – $ 2.55 / bbl
Singapore onshore light distillates stocks, which comprise mostly gasoline and blending components for petrol, dropped 11 percent or 1.25 million barrels to a near one-year low of 10 million barrels. However, the global glut in gasoline stocks continues to weigh on prices.
The balance October crack is now at $ 6.10 / bbl.
The November crack is at $ 5.55 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash differentials for 10ppm gasoil rose to a premium of 77 cents a barrel to Singapore quotes, from 67 cents a day earlier.
Meanwhile, cash discounts for jet fuel widened to 23 cents a barrel to Singapore quotes, from 9 cents on Wednesday.
Singapore onshore middle-distillate stocks fell by 6 percent to 10.1 million barrels in the week to Oct. 10. Since the start of the year, Singapore middle-distillate inventories have averaged 9.4 million barrels a week, compared with a weekly average of about 12 million barrels in 2017. Overall, onshore middle-distillate inventories were 4.1 percent lower than a year ago.
The balance October crack has risen to $ 16.45 /bbl with the 10 ppm crack at $ 17.25 /bbl. The regrade is steady at -$ 0.85 /bbl.
The November crack is at $ 16.40 /bbl with the 10 ppm crack at $ 17.20 /bbl. The regrade is higher at $ 0.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Cash premiums for cargoes of Asia’s mainstay 380-cst high-sulphur fuel oil slipped on Thursday for a fourth straight session to a three-week low. The lower crude oil prices, however, failed to boost the front-month 380-cst barge fuel oil crack, which was at minus $10.09 a barrel on Thursday, down from Wednesday’s settlement of minus $10.02 a barrel.
Meanwhile, Singapore fuel oil inventories climbed to a near three-month high in the week to Oct. 10, as net imports of the fuel climbed for a fourth straight week. Onshore fuel oil inventories climbed 1.089 million barrels to 18.653 million barrels.
The October 180 cst crack has dropped to -$ 2.20 / bbl with the visco spread at $ 0.80 /bbl
The November 180 cst crack has dropped to -$ 2.15 / bbl with the visco spread at $ 1.25 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
The Naphtha-Dubai crack has fallen below – $2.55, we shall buy the crack as a hedge. We would also recommend buying another tranche of 2Q19 at -$3.10 /bbl.
Another hedge we would recommend is for gasoline consumers to buy the November and December gasoline cracks at $ 5.55 and $ 5.60 /bbl. These are historically low levels which have not been seen more than once in the last 5 years.
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.