Crude Oil
Oil prices edged higher on Tuesday after five days of declines as the United States and China prepared to sign a preliminary trade deal. Brent futures gained 29 cents to settle at $64.49 a barrel. WTI crude rose 15 cents to settle at $58.23 per barrel.
The expected signing of a Phase 1 U.S.-China trade agreement on Wednesday, marking a major step in ending a dispute that has cut global growth and dented demand for oil.
Crude price gains, however, were limited as concerns about possible supply disruptions eased due to a decline in tensions in the Middle East. Post settlement, prices dropped further as API reported a build in crude stocks.
Yesterday saw WTI return to contango for the first time since Nov. 19.
US crude oil production is expected to rise by 1.06 mb/d in 2020 to a record of 13.30 mb/d, above its previous forecast of a rise of 930 KB/D, while 2021 output is forecast to rise by 410 kb/d to 13.71 kb/d, the EIA said on Tuesday. The EIA also projected the pace of oil production growth would slow to 3% in 2021, the lowest since 2016 when output declined.
Long-term expectations about oil prices remain firmly anchored around $65-70 per barrel, according to the latest annual survey of energy professionals conducted by Reuters, with most respondents convinced there will be enough oil to meet conceivable demand at around $65/bbl in the medium term.
China’s crude oil imports in 2019 surged 9.5% from a year earlier, setting a record for a 17th straight year, as demand growth from new refineries built last year propelled purchases by the world’s biggest importer. December arrivals were 45.76 million tonnes, customs reported, equivalent to 10.78 million bpd, second only to the monthly record of 11.13 million bpd set in November.
api data
The API data was decidedly bearish as it indicated builds across both crude and products. However, this could be just playing catch up with the EIA data of the previous week. This week’s EIA report is expected to be published today.
Naphtha
Asia’s naphtha crack rose above $100 a tonne on Tuesday for the first time in a month, as tighter supplies due to refinery maintenance overshadowed output cuts by petrochemical makers.
The naphtha margin hit $101.03 a tonne, highest since Dec. 13, even as Asia will lose more than 300 KT of naphtha demand this month from cracker run cuts. Impact from the demand loss was countered by heavy refinery maintenance in the Middle East, resulting in naphtha spot premiums staying firm.
South Korea’s SK Energy and Japan’s Showa Denko were looking to buy cargoes.
The January crack is higher at – $ 2.95 / bbl.
The February crack is at – $ 3.25 / bbl.
Gasoline
Asia’s gasoline crack, at $5.77 a barrel, was at its highest since Dec. 27. While European gasoline exports to the U.S. East Coast remained relatively low, shipments to West Africa and the Middle East were set to increase in the coming week as Saudi Arabia’s 400 kbpd SATORP starts its six-week long maintenance..
The January crack is lower at $ 5.40 /bbl
The February crack is at 6.80/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil were at 36 cents per barrel over Singapore quotes on Tuesday, down from 43 cents a barrel on Monday.
Cash premiums for jet fuel were at 18 cents per barrel to Singapore quotes on Tuesday, compared with a 16-cent premium on Monday.
The January crack for 500 ppm Gasoil is lower at $ 11.35 /bbl with the 10 ppm crack at $ 11.90 / bbl. The regrade is at -$ 0.35 /bbl
The February crack for 500 ppm Gasoil is at $ 12.40 /bbl with the 10 ppm crack at $ 12.95 / bbl. The regrade is at -$ 0.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month crack for 0.5% VLSFO dropped to its lowest in almost a month on Monday, but sentiment remained firm amid expectations that limited supplies will fall short of strong demand over the near to medium term.
The front-month VLSFO crack dropped to $24.836 per barrel above Brent crude during Asian trade on Monday, the weakest since Dec. 16. They were at $26.27 a barrel on Monday.
Sales of marine fuels, also known as bunkers, in Singapore hit a four-year low in 2019, but soared in the last month of the year as vessels globally switched to cleaner fuels to meet new emission rules this year.
Chinese maritime authorities found a South Korean-flagged container vessel using marine fuel that exceeds the sulphur cap under new global emission rules. In what appears to be one of the earliest cases of non-compliance with the International Maritime Organization’s (IMO) rules that started this year, the maritime authorities in east China’s Weihai port detected the ship’s emissions exceeded the proper level when docking there after sailing from South Korea’s Incheon.
The January 180 cst crack has weakened to -$ 13.30 / bbl with the visco spread at $ 2.20 /bbl.
The February 180 cst crack is at -$ 13.70 / bbl with the visco spread at $ 2.20 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for 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.