Crude Oil
Notwithstanding a strong performance by Crude prices on Friday, oil traders will stay focused on a plethora of bearish factors currently weighing on the market in the week ahead. Brent crude futures rose 74 cents to settle at $72.81 a barrel. WTI futures rose 82 cents to $67.63 a barrel.
The strong close on Friday could not prevent WTI futures from posting their sixth weekly loss of 1.2%, their worst streak since August 2015. Brent too posted its 5th loss of 0.5% in 6 weeks.
Reports of faster supply increases from major global producers are also putting downward pressure on the market after the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers led by Russia agreed in June to ease production curbs to make up for lost supplies out of Libya, Venezuela and Iran.
Escalating trade disputes between the U.S, China and other countries have dimmed the outlook for economic growth and boosted the U.S. dollar, making oil more expensive for consumers using other currencies.
The U.S. rig count, an early indicator of future output, rose by 10 to 869 last week, the highest level since March 2015, according to oilfield services firm Baker Hughes.
The market, however, is still being propped by concerns regarding the impact of US sanctions on Iran, an action which is slowly beginning to show signs of impact.
Prices are poised at an interesting point at the end of the week ending 10-Aug-18
13 Aug 2018
Prices are poised at an interesting point at the end of the week ending 10-Aug-18.
The daily chart just closed with a booming Friday after a big drop and a bit of a doji candle which shows uncertainty. In the meanwhile the MACD has crossed over to the negative side which is a bearish indication and the 50 DMA looks set to cross the 100 DMA from above which, should it happen, would be seriously bearish. On the other hand, the RSI in the daily charts seem to have moved into ‘oversold’ territory although the position is not so strong as to call it an oversold one.
The weekly charts show a ‘spinning top’ as which is another expression of uncertainty. The MACD is hugely into negative territory but the RSI is more or less neutral.
Trading Strategy
Last week we had recommended that traders with a bearish bias stay short while prices were below the 100 DMA. While prices breached the 100 DMA twice, once briefly on Tuesday and once with a close on Wednesday, those who waited for a two day close above the 100 DMA would be happy with their positions. We see no reason to change these positions, indeed, adding to short positions near the 100 DMA with a stop above $ 74.75
Supports and Resistances
The $ 72.50 – 72.70 range is the first support area with the $ 72.00 level the next followed the $ 71.60-75 area. There is a very strong support below that in the $ 71.00-30 are which, if broken, could lead to a further fall.
The first resistance lies in the $73.00-25 area. The next resistance is in the $ 74.00. Above that there is strong resistance in the $ 75.50 area.
For bigger and longer term charts please see our Technical Views page.
Naphtha
Asia’s naphtha physical crack for the second half of September hit a three-week low of $99.55 a tonne on Friday as upcoming crackers’ maintenance in South Korea and muted spot deals weighed. Several Naphtha processors have scheduled maintenance taking place either in September or in the fourth quarter of the year. This was reflected in the premiums being paid for cash trades
The August crack has improved to $ 0.15 /bbl. September is still in the negative region at -$ 0.35 /bbl
Gasoline
Asia’s gasoline extended gains for the fourth straight session to reach a fresh 2-1/2 month high of $8.69 a barrel, with some recent support coming from Mexico although supplies were still ample in most major hubs.
ARA light distillates stocks rose by 5 percent in the week to Thursday to reach a three-week high of 1.021 million tonnes. That was nearly 14 percent higher than a year ago.
The balance August crack has increased to $ 9.50 / bbl. The September crack is at $ 9.00 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for jet fuel fell to 1 cent a barrel to Singapore quotes, from 8 cents a barrel on Wednesday as the prompt-month time spread flipped into contango.
However, the market for Jet fuel remains strong. Global air passenger traffic in June rose by 7.8 percent from the same month a year earlier. Traffic in the Asia Pacific region rose by 9.5%. Both India and China posted handsome gains in traffic at 18% and 15% recently.
Cash differentials for 10ppm gasoil edged lower on Friday at 19 cents a barrel to Singapore quotes, compared with 21 cents a barrel on Wednesday.
Gasoil stocks in ARA rose by 3.7 percent in the week to Thursday. Gasoil inventories for the week to Aug. 9 rose to 2.58 million tonnes, levels not seen since early April this year. .
The balance August crack has jumped to $ 15.25 / bbl with the 10 ppm crack at $ 16.15 /bbl. The regrade has dropped to $ 0.00 /bbl.
The September crack is at $ 15.10 / bbl with the 10 ppm crack at $ 16.00 /bbl. The regrade is at $ 0.25 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 180-cst fuel oil crack at a discount of about $1.67 reflected the narrowest discount in about a week as fundamentals stayed firm on Friday as supplies in key trading hubs of Europe and Asia were down.
Fuel Oil stocks in ARA dived nearly 12 percent in the week to Thursday to a near 3-1/2 month low of 1.052 million tonnes.
The balance August 180 cst crack has dipped to -$ 1.10 / bbl with the visco spread at $ 0.80 /bbl.
The September180 cst crack is at -$ 2.05 / bbl with the visco spread at $ 1.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
We have also updated the actual settles for trades in July that were left to settle. While the Fuel Oil trades lost money, the other trades ended in the money.
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.