Crude Oil
Crude prices dropped dramatically yesterday after the IEA forecast a gloomy outlook for the near future in its monthly Oil Market Report. Brent settled 95 cents lower at $62.21 /bbl. WTI lost $ 1.06 /bbl to close at $55.70 /bbl.
The drop was arguably exacerbated by a global selloff in other commodities like nickel and copper which was in response to weaker than expected data from China.
The IEA cut its demand growth estimate for 2017 and 2018 by 52 kb/d and 133 kb/d to an estimated growth of 1.53 mb/d this year and 1.28 mb/d in 2018. It went on to state that it expects supply to exceed demand by 600 kb/d in Q1 2018 and by a smaller 200 kb/d in Q2 2018. This comes days after the OPEC report predicted a strong rise in demand for the next year.
At the end of the trading day, the API also reported a build in crude which is likely to damp prices even further, especially if supplemented by DOE reports.
In other news, ADNOC will launch a new crude oil grade known as “Umm Lulu” in Q1-2018, according to a company statement. Umm Lulu will have API density of around 39 degrees and sulfur content of 0.7% and will be produced from offshore Umm Lulu and Satah al-Razboot fields. Separately, ADNOC said it is on track to increase total oil production capacity to 3.5mbd by end-2018, with production from the offshore upper Zakum field to reach 1mbd by 2024.
API Data
The API in its weekly report showed changes in stocks as below
| Estimated | Actual | |
| Crude | -2.9 | 6.5 |
| Gasoline | -1.0 | 2.4 |
| Distillate | -1.8 | -2.6 |
The huge build in crude is certain to depress sentiment till the DOE data comes out. The distillate draw will give some cheer to the bulls though. However, it may not be that much of a worry as there has been a milder start to winter than normal. It has been this milder start that has caused the IEA to tone down its demand growth forecast.
Naphtha
The naphtha crack eased a bit yesterday to settle at $ 131.82 / MT. However, this is being regarded as a small aberration as demand continues to be strong. Most crackers in the region are working at high rates to cater to petrochemical demand and high LPG prices make naphtha a preferred feedstock for the crackers as of now.
The December crack has eased to $ 4.10 /bbl.
Gasoline
The physical Asian gasoline crack fell 6.7% to settle at $10.54 /bbl yesterday. However, demand from the Middle East is expected to remain firm in light of upcoming turnarounds for maintenance.
The December 92 Ron paper crack is lower today at $ 11.70 /bbl.
Distillates
The physical market appears to be focused on talks for term contracts for next year. The pricing for these contracts appears to be challenging as Platts will be changing the marker for gasoil from 500 ppm to 10 ppm. As of now, the difference for the two grades of gasoil appears to be around 70 – 80 cents.
The December 0.05% Gasoil crack continues to gain in strength and is valued at $12.60 /bbl. The regrade has however eased to $ 1.25 /bbl
Fuel Oil
Fuel cracks slipped yesterday notwithstanding weaker crude prices. The front month 180 cSt time spread flipped back into backwardation after moving to contango on Monday. Backwardation is a sign of demand for a commodity. The expected burgeoning of stocks has slowly pulled out all backwardation out of the fuel oil market.
The December 180 cst crack is unchanged at -2.15 /bbl. The visco spread too is constant $ 0.70 /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.
Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity