Crude Oil
Oil prices ended the day on a positive note as short covering took place over the weekend. Brent crude futures added 17 cents to settle at $80.43 a barrel. WTI crude futures rose 37 cents to settle at $71.34 a barrel.
Brent lost 4.1% for the week while WTI lost 3.6%. Both benchmarks fell 3% on Thursday as global markets sold off.
The monthly report by the International Energy Agency (IEA) on Friday said the market looked “adequately supplied for now” and trimmed its forecasts for world demand growth this year and next to 1.28 and 1.36 million barrels per day respectively. “This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data,” said the IEA.
In the meanwhile, the number of active rigs in the US increased by 8 to 869. This has been the first increase in 4 weeks.
The speculator group cut its combined futures and options position in New York and London by 36,652 contracts to 296,456 during the period.
This morning, crude markets have jumped on reactions to the killing of a Turkish journalist in Saudi Arabia. This comes after US President Donald Trump said Saudi Arabia will face “severe punishment” if the missing journalist turns out to have been killed. Saudi Arabia threatened to retaliate “with an even stronger measure” on any punitive measures taken due to the disappearance. In addition, the Foreign Ministry stressed that that Saudi Arabia’s economy has an “influential and vital role in the global economy”.
15 Oct 2018
Even as prices touched new highs in the previous week, the fall was even more rapid than the rise with prices losing over 3% on one day. The fall has been as spectacular as the rise.
Oil prices are now resting on the bottom of a rising channel in the weekly chart. Further, the RSI is showing an oversold situation in the daily charts. We therefore could see oil prices retrace. However, prices would have to break $ 82.05 before we could confirm resumption of the uptrend.
Trading Strategy
The week closed just below a multiple resistance point of $ 80.50 / bbl. If prices open above this level, then we would recommend buying up to say $ 80.90 / bbl with a stop below $ 80.50 in order to review at $ 82.00 /bbl.
Supports and Resistances
$ 80.00 /bbl would be the first support albeit a psychological one. Below that support lies in the $ 79.20 area. and then the $ 78.50 area.
Resistances are around $ 80.80 area and then at around $ 82.05 followed by $ 83.00.
Naphtha
Asia’s naphtha crack hit a near 3-1/2 month low of $77.70 a tonne on Friday, dragged down by mounting supplies. Trades are being reported at discounts steeper than $4 a tonne.
The balance October crack is marginally higher at -$ 3.50 /bbl.
The November crack is at – $ 2.65 / bbl
Gasoline
Asia’s gasoline crack performed better than naphtha, rising to a four-session high of $6.71 a barrel as inventories in Singapore and Europe fell, although the U.S. stocks unexpectedly rose. Gasoline stocks in ARA eased 2.3 percent to a two-week low of 1.063 million tonnes in the week to Thursday, after hitting a nearly four-month high last week.
The balance October crack is higher at $ 6.45 / bbl.
The November crack is at $ 5.70 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10ppm gasoil were at a premium of 74 cents a barrel to Singapore quotes, compared with 77 cents a barrel in the previous session.
Gasoil stocks in ARA rose 3.5 percent in the week to Thursday. Gasoil inventories for the week to Oct. 11 were at about 3.04 million tonnes, the highest in about eight months. Gasoil stocks rose as high barge freight rates continue to weigh on demand from inland markets. Gasoil inventories were about 19% higher than the previous.
Jet cash discounts were at 7 cents a barrel to Singapore quotes on Friday, against a 23-cent discount on Thursday. The prompt-month spread flipped into a backwardated structure earlier this week after remaining in contango for about two months, and that indicates improving market sentiments.
The balance October crack has eased to $ 16.25 /bbl with the 10 ppm crack at $ 17.05 /bbl. The regrade has improved to -$ 0.85 /bbl.
The November crack is at $ 16.05 /bbl with the 10 ppm crack at $ 16.85 /bbl. The regrade is higher at $ 0.35 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s fuel oil market closed steady on Friday but posted losses for the week, reflecting expectations of an improvement in near-term supply outlook due to higher Western arbitrage supplies in November. The prompt-month 380-cst time spread was unchanged from the previous session at $6.50 a tonne on Friday, but was down from a two-month high of $7.25 a tonne on Monday.
Meanwhile, 380-cst cash premiums edged higher 13 cents a tonne to $5.35 a tonne to Singapore quotes on Friday, snapping four straight sessions of declines on improved buying interest. 380-cst cash premiums were at $5.97 a tonne on Monday.
ARA fuel oil inventories dropped by 216 KT to 1.1 million tonnes in the week to Oct. 11. This is the lowest level in five weeks.
The October 180 cst crack has jumped to -$ 1.40 / bbl with the visco spread at $ 0.80 /bbl
The November 180 cst crack has jumped to -$ 1.45 / bbl with the visco spread at $ 1.30 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Most of our hedges are out of money. Does that mean that they are wrong? This is a time to revisit the philosophy of hedging. When we hedge, we take a position counter to our physical position. This implies that the losses in the hedges are covered by gains in the physical position thereby fixing our price / margin. Hence it is important that we determine that the margin we are hedging any position at is acceptable to us.
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.