Crude Oil
Oil rose about 1 percent on Wednesday, recouping some of the previous session’s heavy sell-off, on growing prospects that the OPEC and allied producers would cut output at a meeting next month to prop up prices. Brent crude futures settled up 65 cents at $66.12 a barrel. WTI crude futures settled 56 cents higher at $56.25 a barrel.
OPEC is said to be discussing a proposal to cut output by 1.4 mb/ d. It is reported that Russia may not be on board for such a large cut. As per reports, Saudi Arabia is willing to take up around 40% of such cuts. In our opinion, it will be difficult to enforce the cuts once again as momentum has been lost. Iran is not going to be a participant in such cuts as it faces permanent sanctions. All the US needs to do is to extend waivers to the buyers from Iran. There will be a point beyond which OPEC cannot cut and balance domestic budgets.
Prices pared gains in post-settlement trade as the API reported a 6th consecutive increase in level of crude stocks.
While oil has crashed from its October high, natural gas futures soared as much as 56 percent during that time to a 4-1/2 year high. Oil’s latest sell-off was exacerbated as traders unwound long oil-short natural gas trades.
In its monthly report, the IEAleft its forecast for global demand growth for 2018 and 2019 unchanged from last month, but cut its forecast for non-OECD demand growth, the engine of expansion in world consumption. The rationale for leaving the growth unchanged was that the demand increase due to reduction in crude prices would offset economic slowdown earlier expected.
API Data
The API reported another hefty build in crude stocks taking inventory levels to 440.7 million barrels. Stocks in Cushing also rose, further adding to the bearishness of the data. Gasoline stocks also rose. While this was against consumer expectations of a draw, it may be said that this rise is fairly consistent with the season. The distillate draw was hefty and far more than expected which would be supportive for prices.
Naphtha
Asia’s naphtha crack extended gains on Wednesday to reach a one-week high of $19.90 a tonne, supported by lower oil prices and a solid demand this week.
However, prices remained at discounted levels due to excess supplies. Hanwha Total for instance had paid a discount of between $4.75 and $6.50 a tonne to Japan quotes on a cost-and-freight (C&F) basis on Tuesday for heavy full-range grade scheduled for second-half December arrival at Daesan. The discount was steeper than around $3 paid by Hanwha Total on Oct. 30.
The November crack has has improved to – $ 6.95 / bbl. The December crack is at -$ 6.25 /bbl
Gasoline
Asia’s gasoline crack similarly extended gains to reach a one-week high of 52 cents a barrel. Despite the gains, the current crack level has lost 95 percent of its value compared to a year ago as supplies have ballooned.
Light distillate stocks in Fujairah dipped by 640 KB to 10.2 million barrels. Stocks are still more than twice as high as last year though.
The November crack has easaed to $ 1.80 /bbl. The December crack is at 1.85 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for gasoil with 10ppm sulphur content were at 19 cents a barrel to Singapore quotes on Wednesday, compared with a premium of 17 cents a barrel on Tuesday.
Cash differentials for jet fuel rose further to 24 cents a barrel to Singapore quotes from 11 cents a barrel a day earlier.
Distillate stocks in Fujairah dropped by over a million barrels to their lowest levels in 14 weeks. Stocks were at 3.05 million barrels. This is 45% higher than the previous year’s level.
The market is currently getting support from demand in Europe which is drawing material there as the arb remains open.
The November crack has improved to $ 18.05 /bbl with the 10 ppm crack at $ 18.95 /bbl. The regrade is higher at $ 1.10 /bbl.
The December crack is at $ 18.15 /bbl with the 10 ppm crack at $ 19.10 /bbl. The regrade is at $ 1.40 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst fuel oil barge crack to Brent crude firmed on Wednesday, contracting its discount to Brent crude to its narrowest in more than 14 months. The December 380-cst barge fuel oil crack to Brent crude was trading at about minus $5.60 a barrel on Wednesday, compared with a discount of $5.75 a barrel in the previous session. The front-month crack discount was last narrower in August 2017.
Fuel Oil stocks in Fujairah built by a nominal 100 KB to 6.78 million barrels. Stocks are 20% lower than last year’s levels.
The November 180 cst crack is higher at +$ 4.70 / bbl with the visco spread at $ 0.45 /bbl
The December 180 cst crack is at +$ 3.10 / bbl with the visco spread at $ 0.75 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Gasoil continues to go on strengthening. Today we will add 10ppm Gasoil-Dubai for Dec18 at $ 19.10 / bbl
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.