Crude Oil
Oil prices rose yesterday on the back of fairly bullish data released by the DOE. Brent crude futures settled 86 cents higher at $76.74 /bbl. WTI futures rose 28 cents to settle at $ 66.64 /bbl
Late in the session, crude prices slipped slightly as the Federal Reserve raised interest rates, a move that was widely expected but still marked a milestone in the U.S. central bank’s shift from policies used to battle the 2007-2009 financial crisis and recession.
The IEA released its month report last afternoon. Major highlights of the report are
- Demand growth forecast for 2018 adjusted to 1.36 mb/d (down by 0.01 kb /d). Demand growth for 2019 forecast at 1.43 mb /d. Rising Petchem capacity to support oil demand
- Suply growth for non OPEC producers increased to 2.04 mb / d (+0.17 mb/d). Supply growth for 2019 forecast at 1.72 mb / d.
- Iran and Venezuelan output may slump by 30% next year.
On the issue of supply increases Saudi Arabia is said to be mooting the possibility of increasing supplies by 500 kb /d immediately with 500 kb/d more in 4Q 2018. Russia, on the other hand is said to be plumping for an immediate rollback to October 2016 levels within three months. The producers meet in Vienna next week.
The DOE reported significant draws across both crude and products last week, once again catching the market totally by surprise.
The crude draw seems to have been caused more or less equally by increase in consumption, increase in exports and a decrease in imports. Domestic crude production reported an increase of 0.1 mb/d. However, this could be because of a rounding off in the reporting figures. Refining run rates were at a seasonal high of 95.7%
Products have drawn due to a huge surge in demand from the previous week of just over 900 kb / d for both gasoline and distillates.
Our material balance statement shows that the draw is gasoline appears to have been overstated while the draw in distillates has been understated. We have been saying that distillates remains a cause for concern with stocks at a seasonal low now.
Click Here for analytical charts on the DOE data
Naphtha
Asia’s naphtha crack rose for a third straight day to reach a one-week high of $86.98 a tonne on Wednesday, lifted by falling oil prices. But fundamentals were weaker than before as tight supplies have eased.
The balance June crack has improved to -$ 2.05 / bbl. The July crack is at -$1.80
Gasoline
Asia’s gasoline crack stayed at a five-week low of $6.08 a barrel as lower oil price was countered by high supplies. Gasoline stocks in Fujairah dropped by 618 kb to 6.86 million barrels.
The balance June crack is higher at $ 8.65 / bbl.
The July crack is at $ 8.80 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for jet fuel slipped to their lowest in more than five months on Wednesday, widening discounts as expectations of additional supplies in the near term continued to weigh on market sentiment. There are concerns that inventories could start building as regional refineries return from seasonal maintenance while demand for the aviation fuel is muted.
Cash differentials for jet fuel widened their discounts to 31 cents a barrel to Singapore quotes, compared with a discount of 29 cents on Tuesday.
Meanwhile, cash premiums for 10ppm gasoil rose to 18 cents a barrel to Singapore quotes on Wednesday, up from a 9 cent premium a day earlier.
Middle distillates inventories in the Fujairah Oil Industry Zone (FOIZ) rose to their highest in more than two months, data via S&P Global Platts showed. Stocks for middle distillate products climbed 2 percent from a week ago to 2.7 million barrels in the week ended June 11.
The balance June crack has improved to $ 13.65 / bbl with the 10 ppm crack at $ 14.50 /bbl. The regrade is lower at $ 0.35 /bbl
The July crack has improved to $ 14.15 / bbl with the 10 ppm crack at $ 15.00 /bbl. The regrade is higher at $ 0.65 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s prompt-month time spread slipped on Wednesday, narrowing its backwardated structure to a more than three-week low of $2.75 a tonne, but market sentiment was still supportive on expectations of tight supplies of finished grade fuel oil into July.
Weak arbitrage economics over the past two months have resulted in few fuel oil shipments along the Rotterdam to Singapore voyage. Total fuel oil flows into East Asia for June are expected to close significantly below May’s six-month high of about 6.6-6.7 million tonnes, with only 5.4-5.5 million tonnes notionally assessed so far. The tighter flow volumes were largely due to lower Western arbitrage supplies which were assessed at an eight-month low of less than 3 million tonnes.
The balance June 180 cst crack has dropped to -$ 3.60 / bbl. The visco spread is steady at $ 1.50 /bbl.
The July 180 cst crack is lower at -$ 3.50 / bbl. The visco spread is at $ 1.70 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to add or report today.
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.