Crude Oil
A sizeable build in crude and distillate stocks in the weekly DOE report sent prices tumbling by over 2%. Brent crude dipped $1.70 to settle at $70.76 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell $ 2.03 to close at $65.01 a barrel.
The trade war has effectively been impacting trade and, as a consequence arguably, economic growth. World trade volume growth peaked in January, and since then has nearly halved to less than 3 percent by May.
Chinese importers appear to be shying away from buying U.S. crude oil as they fear Beijing may decide to add the commodity to its tariff list. Not a single tanker has loaded crude oil from the United States bound for China since the start of August, compared with about 300,000 barrels per day (bpd) in June and July.
Meanwhile, The US government ruled out removing steel tariffs on Turkey even if Ankara frees a US pastor.
Separately, Qatar has also pledged $15 billion in investment to Turkey, providing some support to the Turkish lira.
API Data
The US DOE reported a huge build of 6.8 million barrels in its weekly report. This was not only against market expectations of a draw, but also higher than the build reported by the API. The build came inspite of refineries running at an all time high run rate of 98.1%. A sizeable build in Cushing marked the return of the Syncrude pipeline back into operations. Crude stocks have now climbed by over the 5 year average!
While gasoline drew marginally, distillates also reported a large build.
US gasoline stocks have fallen 1 million bbl since the start of the year compared with 5 million in 2017 and 10-year average of 7 million barrels.
U.S. distillate stocks, which rose 3.6 million bbl to 129 million bbl, are rising much faster than normal at this time of the year.
The rise in crude stocks can be attributed to a huge rise of over 1.2 Million bpd in net imports. The rise in distillate stocks is largely due to a reduction in demand while the drop in gasoline stock is mainly due to an increase in exports as can be seen by the material balance statement below.
For detailed charts on the US DOE data, please click here.
Naphtha
Asia’s naphtha crack was at a 1-1/2 week high of $108 a tonne, supported by demand from Asia’s top naphtha importer, but supplies were not lacking and this was reflected in a spot deal.
Taiwan’s Formosa bought 100,000 tonnes of open-specification naphtha for second-half September arrival at Mailiao at premiums of around $1 a tonne to its own price formula on a cost-and-freight (C&F) basis. This was down by almost 8 times versus the $8 a tonne premium it had paid on July 25 in reflection of the much weaker fundamentals caused by higher inflows of Western cargoes arriving next month.
Supplies were expected to increase with more cargoes potentially arriving next month from the West after volumes for August arrival fell to a five-month low.
The August crack has jumped to $ 0.60 /bbl. September is at $ 0.20 /bbl
Gasoline
Asia’s gasoline crack hit $11.55 a barrel on Wednesday, its highest in almost 11-months, after India’s Reliance Industries had to declare force majeure on gasoline exports following trouble at a gasoline-making unit. According to ship tracking data, four gasoline cargoes were scheduled to load from Sikka on to ships, with charters including oil major Shell.
Light distillates inventories in the Fujairah Oil Industry Zone (FOIZ) fell 16% percent from a week ago to 4.8 million barrels in the week to Aug. 13.
The balance August crack has shot up to $ 11.95/ bbl. The September crack is at $ 10.90 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for 10ppm gasoil climbed on Wednesday while refining margins lingered near their highest levels in 2-1/2 months as prospects of tightening supply helped firm up market sentiments. Cash premiums for gasoil with 10 ppm sulphur content rose to 17 cents a barrel to Singapore quotes, up from 15 cents a barrel on Tuesday.
China’s refined products exports in July were 4.57 million tonnes, nearly flat from a year earlier. The arbitrage window for gasoil to Europe is quite healthy at the moment, but they’re not widely open for other regions.
Meanwhile, discounts on jet fuel cash differentials narrowed by a cent on Wednesday as the August-September time spread remained in contango. Jet cash discounts were at 19 cents a barrel to Singapore quotes.
Middle distillates inventories in the Fujairah Oil Industry Zone (FOIZ) rose 20 percent from a week ago to 3.5 million barrels in the week to Aug. 13.
The balance August crack is higher at $ 15.35 / bbl with the 10 ppm crack at $ 16.25 /bbl. The regrade has dropped to $ -0.50 /bbl.
The September crack is at $ 15.15 / bbl with the 10 ppm crack at $ 16.00 /bbl. The regrade is at $ 0.20 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Front-month time spreads for Asia’s 380-cst fuel oil slipped to a more than one-week low on Wednesday as industry participants expected improved higher supplies in August and September to ease supply constraints in the Singapore trading and storage hub.
The 380-cst Sept/Oct time spread was trading at about $5 a tonne on Wednesday, down from $5.25 a tonne on Tuesday and its lowest since Aug 7.
Fuel oil inventories at the Fujairah Oil Industry Zone (FOIZ) fell 10 percent, or 1.06 million barrels to 9.293 million barrels in the week ended Aug 13. Compared with the same time last year, Fujairah fuel oil inventories were 23 percent lower, but were above the 2018 weekly average of 8.308 million barrels
The balance August 180 cst crack is steady at -$ 1.50 / bbl with the visco spread at $ 0.90 /bbl.
The September180 cst crack is at -$ 2.35 / bbl with the visco spread at $ 1.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The strength in naphtha and gasoline has resulted in our Naphtha 2Q19 buy looking better.
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.