Yesterday, we had remarked that were the DOE to reinforce the bearish data published by API, we expected the $ 47.00 area to be tested severely. Seldom have a commentator’s words been so prophetic. Brent crude moved to $ 47.00 / bbl in about 45 minutes after the data was published and stated there since then.
Having said the above, we have to admit we are impressed by the support at that level.
The bearish sentiments in the market have been reinforced by the International Energy Agency (IEA) which announced on Wednesday that it expects growth in oil supply in 2018 to outpace an anticipated pick-up in demand. The IEA further stated that production outside the OPEC countries would grow twice as quickly in 2018 as it will do this year. In terms of numbers, the IEA expects that in 2018, non-OPEC production will grow by 1.5 million bpd which is slightly more than the expected increase in global demand.
The EIA, in its weekly report on US stocks yesterday, stated that crude stocks had fallen by 1.7 million barrels. This was a bit less than the expected drop of 2.7 million barrels. Gasoline once again built by 2.1 million barrels (against an expected draw of 500 kb. Distillate stocks built as well, albeit less than expected (300 kb versus 700 kb expected)
Refinery runs were higher at 94.4% . Gasoline demand was 0.5% lower than last week and 0.3% lower than last year. The continued lack of demand shows exactly why crude prices are heading south.
At the start of the year, crude oil stocks were a tad above 150 million barrels over the average. The first quarter actually saw this excess rise to 180 million barrels, before sustained draws pulled it back to 130 million barrels. This number has increased over the last couple of weeks to 135 million barrels. While one can definitely grant a strong net pull back in the second quarter, we are of the opinion that ‘rebalancing’ is a strong word to use for this drop.
The Asian naphtha market remains weak as high arbitrage inflows in June and July are expected to keep the market well supplied. In fact, the West-to-East naphtha supplies are expected to hit the highest for this year at 1.4 million tonnes in June. The July arbitrage volume is also expected to stay strong at 1.3 million tonnes.
The June Japan Naphtha- Dubai crack is slightly lower at -$0.65 /bbl and the July crack is at -$0.85 /bbl
Gasoline market continues to be depressed amidst the market’s ongoing struggles with weak gasoline demand in the United States, the world’s top consumer of the motor fuel, and rising production and inventories.
June crack is lower at $10.00 /bbl while the July crack is at $ 9.30 /bbl
Distillate markets are continuing to strengthen with steady demand for diesel coming in from India and traders in Singapore looking to take advantage of arbitrage opportunity for moving ATF cargoes from Singapore to the West. India’s IOC is heard to have bought upto 120,000 MT of diesel for 1H July delivery while HPCL is in the market seeking an additional 65,000 MT for July.
China Aviation Oil and Unipec are heard to be planning mvoement of ATF cargoes from Singapore to Europe for end June loading.
The June crack is up at $ 11.15 /bbl while the June regrade has softened further to -$0.65 /bbl. The July crack is at $ 10.60 /bbl with the July regrade now at -$ 0.30/bbl
The Fuel Oil cracks are continuing to strengthen on the back of drawdowns in onshore inventories. However, we remain skeptical of this upward trend because of the ample offshore inventories. It appears that the supplies have been artificially tightened by traders Petrochina and Mercuria who, since March this year have bought the majority of deals traded in the Platts window. According to traders, PetroChina may be storing fuel oil in about 7 to 9 very large crude carrier (VLCC) supertankers, which is about the same volume as what is stored totally in onshore tanks
The June 180 cst crack is stronger at $ 0.20 / bbl/ The visco spread is unchanged at $ 1.35 / bbl. The July crack is at -$0.60 /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.