Crude Oil
Oil prices rose about 3 percent on Tuesday, along with world stock markets, supported by China’s plan to introduce policies to stabilize a slowing economy. Brent crude rose $1.65 to settle at $60.64 a barrel. U.S. crude futures ended $1.60 higher at $52.11 a barrel..
China’s National Development and Reform Commission offered some support on Tuesday, signaling it might roll out more fiscal stimulus.
The market also found support in news that the U.S. will not grant further waivers to its sanctions on Iran. U.S. Special Representative for Iran Brian Hook said on Saturday that Washington was not looking to grant any more waivers for Iranian oil after the re-imposition of U.S. sanctions. The move could limit Iranian oil coming the market in coming months.
Such positive signals and hopes for renewed U.S. China talks to resolve trade tensions have boosted world stock markets and oil prices, but fears about global growth weigh heavily.
However, both oil benchmarks pared gains slightly in post settlement trade after British lawmakers defeated Prime Minister Theresa May’s Brexit divorce deal by a crushing margin, triggering political upheaval that could lead to a disorderly exit from the European Union or even to a reversal of the 2016 decision to leave. API Data
Naphtha
Weak gasoline fundamentals have hit Asia’s naphtha, where cracks eased 3 percent to a two session low of $43.28 a tonne.
Asia’s top naphtha buyer, Formosa Petrochemical Corp, was looking to buy heavy naphtha for March 11 25 arrival at Mailiao through a tender closing on Jan. 16, with offers valid until Jan. 17. India’s Bharat Petroleum Corp (BPCL) offered 25,000 tonnes of naphtha for loading between Jan. 31 to Feb. 2 from Mumbai. The tender closes on Jan. 17.
The January crack has improved to -$ 4.85 /bbl.
The February crack is at -$ 4.95 /bbl.
Gasoline
Asia’s gasoline crack flipped to a discount on Tuesday, as pressure from high supplies pulled it back from the previous day’s positive territory. The crack was at a discount of 33 cents a barrel, its lowest since Jan. 9.
Exports from Europe to the U.S. East Coast, traditionally the main outlet for surplus gasoline, dropped in the second half of 2018, leading to sharp stock builds. As a result, European exports of gasoline to the Middle East and Asia have surged in January. A tanker carrying gasoline from the U.S. Gulf Coast was headed to Australia on Monday, an unusual route that pointed to signs of oversupply in the former.
The January crack has improved to $ 0.70 /bbl.
The February crack is at $ 1.15 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for gasoil with 10ppm sulphur content narrowed to 39 cents a barrel to Singapore quotes, against 40 cents in the previous session.
Jet fuel cash discounts were at $1.50 a barrel to Singapore quotes, their widest since mid-October 2009 and up from $1.42 on Monday.
The region’s jet fuel market has been battered by a warmer winter, curbing demand for heating kerosene, which belongs to the same grade of oil products as the aviation fuel. North Asia has not yet experienced any prolonged winter cold snaps so far this year. Temperatures in Tokyo and Beijing were expected to remain warmer than usual for the next couple of weeks, with Seoul turning warmer than normal from the middle of this week.
The Chinese New Year early next month should boost holiday passenger traffic in the aviation sector, offering some support to the jet fuel market.
The January crack has dropped to $ 12.80 /bbl with the 10 ppm crack at $13.75 /bbl. The regrade is steady at $ 1.35 /bbl.
The February crack is at $ 14.05 /bbl with the 10 ppm crack at $15.05 /bbl. The regrade is at $ 1.55 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front month viscosity spread, the price differential between front month 180 cst and 380 cst high sulphur fuel oil (HSFO) swaps, hit a record low on Tuesday amid ample supplies of low viscosity materials in the Singapore trading hub.
The viscosity spread for February slipped to $2 a tonne on Monday, down from $2.25 a tonne in the previous session and its lowest since records began in 2013.
Weak regional demand for low viscosity, low density materials has diverted cargoes of the residual fuels to the Singapore hub, weighing on prices of the lower viscosity 180 cst HSFO.
The January 180 cst crack has improved to -$ 0.45 / bbl with the visco spread at $ 0.40 /bbl.
The February 180 cst crack is at -$ 0.80 / bbl with the visco spread at $ 0.35 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The regrade has really eased to far more reasonable levels although it is still high as per historical data. FO cracks are still holding and it is still not clear where they are headed. We shall continue to use upticks to put appropriate hedges in place.
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.