Although crude oil closed only marginally higher on Friday, with Brent increasing by $ 0.07/bbl to settle at $50.84/bbl while WTI increasing by $0.01 /bbl settle at $ 47.84/bbl, the market is up sharply this morning on news that Saudi Arabian and Russian energy ministers have issued a joint statement that an OPEC-led crude production cut would be extended from the middle of this year until March 2018. This joint statement is significant given that Russia is the world’s biggest oil producer, while Saudi Arabia is the biggest exporter. Together, they control around 20 million bpd in daily output, equivalent to a fifth of daily global consumption.
However, undermining efforts by OPEC and Russia to stabilize the market has been the United States, which did not participate in the agreement to cut supplies. On the contrary, U.S. energy firms have added oil rigs for 17 consecutive weeks, extending a 12-month drilling recovery that is expected to help boost crude production in the United States to a record high next year. Drillers in the US added eight oil rigs in the week to May 12, bringing the total count up to 885, which is a whopping 479 up from May 13 last year.
This analysis has been done on charts at close of day Friday.
The daily charts show a bullish crossover in the MACD, which is heartening for the bulls. However, the price action in the $ 51/bbl area for the past two days has been disappointing. In fact the Friday candle is a doji which is reflective of market uncertainty.
The weekly chart shows a bullish candle, but to seriously confirm the change in trend, we need to get above the 50 WMA line at close to $ 52.60 for the next week.
Immediate supports lie at $50.45, $50 (pyschological) and $ 48.76. Resistances lie at $ 51.20, $ 51.63 (strong) and $ $52.16. Our bias remains slightly to the downside for now.
The market remained unchanged with high ARA inventories being offset by strong Asian demand. Europe ships most of its excess naphtha to Asia. Naphtha stocks ARA storage hub rose to 367,000 tonnes in the week to May 11, highest since March 23. In Asia, whilst Formosa (Taiwan) & Hanwha (South Korea) had already purchased some cargoes, Chinese buyers CNOOC and Unipec were in the market seeking naphtha.
In other news, Bharat Petroleum Corp Ltd of India is heard to be revising its price formula for naphtha exports to include the mean prices from Argus Media instead of only relying on Platts.
The balance May Japan Naphtha- Dubai crack is unchanged at -$0.45 /bbl while the June crack is at -$0.80 /bbl
Although the fall in gasoline inventory at ARA (in line with a drop in inventories at both Singapore and the US) should have been quite bullish, the market is still not seeing any jump in cracks. Gasoline inventories held at ARA storage hub fell nearly 8 percent to 1.021 million tonnes, the lowest weekly volumes since March 30
The Singapore crack for May stays at $ 11.80 /bbl while the June crack is slightly higher at $10.95 /bbl
The gasoil market continues to remain strong supported by spot demand from Indian PSU Refineries. However, this robust demanding is not propping up the cracks as supplies are soon expected to increase as refiners return from maintenance.
The May Gasoil crack is slightly down at $ 10.50 / bbl whilst the June crack is at at $10.00/bbl. The May regrade recovered to -$0.50 and June is at $ 0.30 /bbl
Fuel oil weakened slightly notwithstanding bullish ARA inventory numbers as suppliers locked in replenishment supplies from northwest Europe to meet firm demand in Singapore. Fuel oil stocks at independently held storage in the ARA hub sank by 25 percent to a three-month low in the past week on the back of rising exports. Inventories fell to 785,000 tonnes, their lowest since Feb. 16
The May 180cst-Dubai crack is down at -$ 2.20 / bbl while the June crack is valued at -$3.00. The May Visco spread unchanged at $1.35/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.