Crude Oil
Oil prices on Tuesday jumped by the most so far this year after the United States said it would delay imposing a 10% tariff on certain Chinese products. Brent crude futures settled $ 2.73 higher at $ 61.30 /bbl. WTI crude futures settled $ 2.17 higher at $57.10/bbl.
US President Trump backed off his 1 Sep’19 deadline for tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods, in the hopes of blunting their impact on US holiday sales. The tariffs will be effective from 15 Dec’19 instead.
Since falling to their lowest levels since January on Aug. 7, Brent has gained 9% and WTI 12%. That bigger gain in WTI over the past four days briefly cut Brent’s premium over WTI to its lowest since March 2018. Yesterday’s gain was the biggest daily percentage gain for Brent since December when the contract gained 7.9%. We are of the opinion that most of the gains would have been due to short covering rather than fresh length entering the market. Global vehicle production is falling at the fastest rate since the financial crisis, depressing manufacturing output, freight and the consumption of oil and other commodities.
Global motor vehicle output declined by 1% in 2018, and is set to drop more in 2019 lending further credence to the slowdown in global economic growth.
apI data
The API reported sizable builds in Crude and Gasoline stocks this week. Most of this would be playing catchup with the DOE’s figures of the previous week.
U.S. government data on crude stocks is due on Wednesday morning.
Naphtha
Asia’s naphtha crack fell to a near two-month low of $18.93 a tonne on Tuesday pressured by plentiful supplies.
Ongoing and coming maintenance of naphtha crackers in Asia were weighing on demand.
The August crack is higher at -$ 7.10 /bbl.
The September crack is at -6.35 / bbl.
Gasoline
Asia’s Gasoline crack settled at a two-session high of $7.54 a barrel in response to firm demand from part of Asia.
Indian refiners continued to seek for cargoes as refineries across the country were taking turns to shut for maintenance and upgrading works to produce cleaner fuels.
HPCL was looking to buy up to 180 KT of petrol for September to October delivery to Vizag, while IOC in last week sought up to 30 KT of the product although the details of this tender were not known. BPCL bought 60 KT gasoline for July-August delivery from a Middle East firm recently at premium ranging from $4.50 to $9 a barrel. However, the marker to which this premium was given is not clear. We think it is likely to be MOPAG.
The August crack has jumped to $ 8.00 / bbl.
The September crack is at $ 6.85 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Backed by firmer demand for physical cargoes, cash differentials for gasoil with 10 ppm sulphur content rose to a premium 17 cents a barrel to Singapore quotes on Tuesday, compared with a 3-cent premium on Thursday.
The August/September time spread traded at a premium of 40 cents a barrel on Tuesday compared with 36 cents on Thursday.
Cash premiums for jet fuel remained unchanged at 4 cents a barrel to Singapore quotes on Tuesday.
The August crack for 500 ppm Gasoil is much higher at $ 16.35 /bbl with the 10 ppm crack at $ 17.25 / bbl. The regrade is flat – $ 0.00 /bbl.
The September crack for 500 ppm Gasoil is at $ 17.05 /bbl with the 10 ppm crack at $ 17.75 / bbl. The regrade is at – $ 0.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Crack values for high-sulphur fuel oil (HSFO) market extended losses on Tuesday, falling to their lowest levels in nearly three years, on easing supply constraints and ahead of an expected drop in demand later this year as new shipping fuel rules take effect.
The September 380-cst HSFO barge crack fell to around minus $15.85 a barrel below Brent crude on Tuesday. The front-month 380-cst HSFO barge crack is now at its widest discount against Brent crude since November 2016. The barge crack was at minus $15.51 a barrel in the previous session.
At the same time, a rally in low sulphur straight run (LSSR) material has continued unabated with the spread between 0.5% LSSR and 3.5% cracked HSFO material reaching over $160 per tonne on Friday..
The August 180 cst crack is steady at – 7.55 / bbl with the visco spread at $ 1.25 /bbl.
The September 180 cst crack is at – 8.25 / bbl with the visco spread at $ 1.65 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh recommendations for today. If 4Q19 10 ppm gasoil cracks breach $ 19 / bbl, we will consider instituting a 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.