Crude Oil
After rising about by about one percent on Monday after top exporter Saudi Arabia announced a cut in supply for December, oil prices collapse due to uncertainty in the US equity markets. Brent crude futures settled 6 cents lower at $70.12 a barrel. WTI crude futures settled 26 cents lower at $59.93 a barrel.
Markets would have been muted yesterday due to the US holiday to mark Veteran’s day.
In the OPEC meeting held yesterday, the cartel and its partners mulled the cutting of 1 mb/d of supply to prevent a supply glut next year. Saudi Arabia also expressed concern that US sanctions may have removed less Iranian oil than expected. However, he added that market conditions could change by the time the coalition meets Dec 6-7 in Vienna and hence the JMMC would not recommend specific cuts for now.
Fund Positions (from analysis by John Kemp, Senior Market Analyst, Reuters)
Hedge funds and other money managers cut their combined net long position in the six major petroleum futures and options contracts by another 108 million barrels in the week to Nov. 6. The net long to short ratio has decreased to lower than 4:1 as of last week, down from more than 12:1 at the end of September and the lowest since August 2017.
The number of bullish long positions has fallen to just 849 million barrels, from 1.195 billion six weeks ago and a record 1.625 billion at the start of the year.
Some fund managers have begun to turn outright bearish, with short positions now up to 228 million barrels from just 96 million barrels six weeks ago.
Naphtha
No fresh news on the Asian Naphtha market today.
The November crack has is slightly higher at – $ 8.45 / bbl. The December crack is at -$ 7.60 /bbl
Gasoline
Asia’s gasoline crack edged lower on Monday, widening its unusual discount to Brent crude as concern over excess near-term supplies and rising crude oil prices weighed on sentiment. Asia’s gasoline margin to Brent crude slipped to minus 60 cents a barrel on Monday, down from a discount of minus 41 cents on Friday. The gasoline market could continue to face price pressure over the near term as refiners continue to produce more of the fuel due to strong middle and heavy distillate refining margins.
The November crack has improved to $ 1.30 /bbl. The December crack is at 1.50 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for 10ppm gasoil dropped to 16 cents a barrel to Singapore quotes on Monday, their lowest since Aug. 14.
The prompt-month time spread flipped into a contango structure on Monday for the first time since July, with the November/December spread at minus 2 cents a barrel, compared with a premium of 1 cent a barrel on Friday.
Record low water levels on the Rhine river have caused a fuel supply deficit in parts of Europe’s industrial heartlands that are now looking at markets as far as Singapore for supplies. The exchange of futures for swaps (EFS), which determines the spread between gasoil prices in Northwest Europe and Singapore , were around minus $20 per tonne on Monday which means that the arb to Europe is still open.
Meanwhile, cash differentials for jet fuel were at a discount of 31 cents a barrel to Singapore quotes on Monday, compared with a discount of 32 cents a barrel on Friday.
The November crack is slightly higher at $ 17.05 /bbl with the 10 ppm crack at $ 17.95 /bbl. The regrade is higher at $ 1.10 /bbl.
The December crack is at $ 17.30 /bbl with the 10 ppm crack at $ 18.25 /bbl. The regrade is at $ 1.50 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month fuel oil crack held firm on Monday despite a sharp increase in crude oil prices in a sign of ongoing near-term strength in the market. This, however, came amid limited trade liquidity in the front-month crack. The December 380-cst fuel oil crack to Brent crude was trading at about minus $6.25 a barrel on Monday, compared with a discount of $6.20 a barrel on Friday.
ADNOC will reduce its exports of a type of fuel oil prized by the market as a refining feedstock from 2019, adding to tightening global supplies of the oil product. Exports of straight-run fuel oil are likely to will stop next year as ADNOC has nearly finished repairs to the 127 Kbpd residue fluid catalytic cracker (RFCC) at its Ruwais refinery. The restart of the RFCC will take as much as 450 KT feedstocks out of the market each month. The loss of the SRFO from the supply pool will impact global balances but its near-term market impact would be difficult to gauge.
The November 180 cst crack is higher at +$ 3.75 / bbl with the visco spread at $ 0.65 /bbl
The December 180 cst crack is at +$ 2.25 / bbl with the visco spread at $ 0.85 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The regrade strip has improved to $ 1.40 for 2019. Should it cross $ 1.50 /bbl we will definitely lay on an hedge.
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.