The world’s top exporter Saudi Arabia outlined cuts to customers in July that included a reduction of 300,000 barrels per day (bpd) to Asia as well as deeper cuts in allocations to the United States. The Outlook however continues to be bearish with rig counts continuously rising in the US and the production volumes expected to rise in Nigeria and Libya, both of which are exempt from the OPEC supply cuts.
The market’s weakness can be seen in technical activity in Brent crude, where the 50-day moving average fell through the 200-day moving average on Monday, a strong indicator of a near-term weakening trend also known as a “Death Cross”. The last time this happened was in mid-2014 and it preceded a massive selloff in oil that dropped Brent from $108 a barrel to about $47 a barrel in the span of five months!
The naphtha physical markets continue to soften with physical trades heard to have been concluded at weak numbers. Among the sellers were Kuwait Petroleum Corp (KPC) which sealed a new annual naphtha supply deals at lower premiums than a year ago and India’s IOC which sold a partial cargo of naphtha for loading in late June at a steep discount to its price formula. The cracks however are slightly higher than yesterday.
The June Japan Naphtha- Dubai crack is at -$0.70 /bbl and the July crack is at -$0.90 /bbl
Gasoline cracks also continue to weaken on the back of inventory builds and lackluster demand. Adding to the oversupply fears is anticipation of a step up in exports from China.
June crack is lower at $10.70 /bbl while the July crack is at $ 9.90 /bbl
Distillate markets strengthened further after the release of bullish API Inventory data. Cracks were also supported by the news that Singapore Refinery Company’s refinery on Jurong Island had to halt operations of its No. 1 crude distillation unit (CDU) due to a fire. However, given the large system its shareholders have, there are unlikely to be major disruptions to gasoil cargoes or imports by this refinery.
The June crack is up at $ 10.95 /bbl while the June regrade has softened further to -$0.50 /bbl. The July crack is at $ 10.40 /bbl with the July regrade now at -$ 0.20/bbl
Although the Fuel Oil cracks are marginally stronger today, this trend is unlikely to continue with fuel oil imports set to climb this month. As reported in yesterday’s Oil Price Digest, the total fuel oil flows from west to Asia could reach the highest in four months in June at nearly 5 million tonnes.
The June 180 cst crack is at -$ 0.35 / bbl/ The visco spread is unchanged at $ 1.35 / bbl. The July crack is at -$1.10 /bbl
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.