Crude Oil
Oil prices shed 3% on Wednesday after fresh Chinese and European economic data revived global demand fears and U.S. crude inventories rose unexpectedly for the second week in a row.. Brent crude futures settled $ 1.82 lower at $ 59.48 /bbl. WTI crude futures settled $ 1.87 lower at $55.23/bbl.
China reported disappointing data for July, including a surprise drop in industrial output growth to a more than 17-year low, underlining widening economic cracks as the trade war with the United States intensifies.
The global economic slowdown, amplified by tariff conflicts and uncertainty over Brexit, is also hitting European economies. A slump in exports sent Germany’s economy into reverse in the second quarter. The euro zone’s GDP barely grew in the second quarter of 2019.
The U.S. Treasury bond yield curve inverted for the first time since 2007, in a sign of investor concern that the world’s biggest economy could be heading for recession.
Gibraltar will release on Thursday an Iranian oil tanker seized by Royal Marines in the Mediterranean in July after being convinced the tanker is no longer heading to Syria.
doe data
A second week of unexpected builds in U.S. crude inventories added to the pressure on the oil markets. At 440.5 million barrels, inventories were about 3% above the five-year average for this time of year. The build can largely be attributed to a drop in refinery runs from 96.4% to 94.8%. Crude imports, at 7.7 mb/d were the highest since the first week of the year.
Gasoline stocks fell by 1.4 million barrels, compared with the market expectations for an increase of 25,000 barrels, as demand jumped to a record 9.93 million barrels per day.
Our material balance statement projects a much larger draw for gasoline as production as well as imports of gasoline dropped in the face of increasing demand. A similar situation can be seen in distillate as well.
Naphtha
Asia’s naphtha crack recovered to a two-session high of $21.28 a tonne on Wednesday after falling to a near two-month low the previous day.
However, traders looked past the marginal increase in crack value as fundamentals remained weak with ample supplies.
Cracker maintenance in Indonesia and Taiwan this month would wipe out more than 250,000 tonnes of naphtha demand in August.
The August crack is higher at -$ 6.90 /bbl.
The September crack is at -6.00 / bbl.
Gasoline
Asia’s Gasoline crack edged down 2 cents to $7.52 a barrel, but cash deals were brisk with five trades done.
This was the highest number of trades concluded in a single session since Aug. 7. Gasoline stocks in Fujairah dropped marginally to 7.65 million barrels in the week ended August 13.
The August crack has dropped to $ 7.55 / bbl.
The September crack is at $ 6.30 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for gasoil with 10 ppm sulphur content rose on Wednesday for a second straight session to a premium of 22 cents a barrel to Singapore quotes, up from 17 cents per barrel a day earlier.
Cash premiums for jet fuel were at 3 cents a barrel to Singapore quotes on Wednesday, down one cent from Tuesday.
The refining cracks, as well as the cash differentials for aviation fuel are currently at their highest levels for this time of the year since 2013.
The jet fuel market got a boost in recent weeks from a short-term supply tightness as some regional refiners reduced output especially during the second quarter for scheduled plant maintenance. But traders were concerned the market could take a hit as late summer travel demand drops and refineries undergoing turnarounds gradually ramp up production.
Middle distillate stocks at Fujairah surged by 25% to 2.86 million barrels.
The August crack for 500 ppm Gasoil is higher at $ 16.55 /bbl with the 10 ppm crack at $ 17.45 / bbl. The regrade is flat – $ 0.00 /bbl.
The September crack for 500 ppm Gasoil is at $ 17.25 /bbl with the 10 ppm crack at $ 17.95 / bbl. The regrade is at – $ 0.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst high-sulphur fuel oil (HSFO) barge crack discount to Brent crude widened on to a near three-year low on Wednesday. Improving supply outlooks and expectations of a falling demand for high sulphur marine fuels later this year as new shipping fuel rules take effect have helped pulled the fuel oil market from record highs seen last month.
The Sept 380-cst barge crack was at minus $15.97 a barrel against Brent, down from minus $15.75 a barrel on Tuesday and its lowest since November 2016. A month ago, the front-month crack was at minus $8.52 a barrel. This came despite weaker benchmark crude oil prices.
Meanwhile, fuel oil inventories in the Fujairah oil hub rose to a seven-week high of 10.74 million barrels in the week to Aug. 12 following a second consecutive week of large inventory builds.
The August 180 cst crack collapsed to – 9.60 / bbl with the visco spread at $ 1.35 /bbl.
The September 180 cst crack is at – 9.95 / bbl with the visco spread at $ 1.85 /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.