Crude Oil
Crude prices continued their recovery on Friday, buoyed by the upcoming strike in Nigeria. Brent crude oil gained 88 cents to settle at $75.33.U.S. crude rose 68 cents to settle at $71.01 a barrel.
For the week, Brent lost 2.7% while WTI lost about 3.9 percent this week. The market pared gains late in the session on a report that the Trump administration is actively considering tapping in to the country’s Strategic Petroleum Reserve, which would add supply to the market.
Hundreds of workers on Norwegian offshore oil and gas rigs went on strike on Tuesday after rejecting a proposed wage deal, closing Shell’s Knarr field, which produces 23,900 barrels of oil equivalent per day.
In Iraq, about 100 protesters demanding jobs and better services closed access to Umm Qasr commodities port near the southern city of Basra on Friday
China’s crude oil imports fell for a second month in a row in June to their lowest level since December, as shrinking margins and volatile oil prices led some independent refiners to scale back purchases.
The U.S. oil rig count remained steady at 863 this week. The rate of growth has slowed over the past month or so with a decline in crude prices from late May through late June.
Hedge funds and other money managers raised their combined futures and options position in New York and London by 847 contracts to 457,718 during the week ended July 10, the highest since April 24, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday
16 Jul 2018
Take a step back………..
Last week was a long candle with a height of close to $ 7/bbl. We also had a drop of more than 5%, the largest fall on the single day in two years mid-week. This was followed by two days of strong recovery where, at one point, prices had retraced 50% of their drop. This week, we will therefore take a step back and look at a longer term chart, the monthly chart.
A quick glance at this chart, from an Elliot Wave Theory perspective suggests that Wave III is over and we are looking at Wave IV where prices will meander a bit before rising again in one final burst.
The eventual target price for this kind of action could be as low as $69 /bbl as a first target. There are many support levels before this level is reached therefore, it is hard to be sure. Prices have held at the 100 dma support around the $ 73 levels twice in the past two days. Friday’s close is itself a support on the rising monthly channel.
Trading Strategy
Last week’s tsunami stopped all positions. For now we would recommend staying on the sidelines. Aggressive traders may like to go long around $ 73.50 with a stop below the 100 dma targeting the 50 dma in the $ 76.50- 77.00 range.
Supports and Resistances
Supports are at current levels and then $ 74.20 and then $ 72.80- $73.20 area.
Resistances would appear to be first just above $ 75.00, then around $ 75.80 followed by the $76.50 area.
Naphtha
Asia’s naphtha crack eased from a 1-1/2-month high on Friday and hit a two-session low of $98.93 a tonne, but the current value reflected a 13.7 percent increase from a month ago.
The July crack is steady at -$ 0.40 / bbl. The August crack is at -$ 0.50 /bbl
Gasoline
Asia’s gasoline crack rose for seventh straight session to a one-month high of $5.89 a barrel.
The U.S. Environmental Protection Agency has ditched a detailed plan that would have forced refiners to blend more biofuels into their gasoline and diesel in 2019 to compensate for volumes likely to be exempted under the agency’s small refinery hardship waiver program.
The July crack has risen to $ 8.40 / bbl. The August crack is at $ 8.95 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for 10ppm gasoil narrowed their discounts on Friday but remained within close sight of this year’s weakest levels as inventories for the industrial fuel in the Amsterdam-Rotterdam-Antwerp (ARA) storage hub climbed to their maximum levels in more than two months.
Cash differentials for gasoil with 10ppm sulphur content were at a discount of 19 cents a barrel to Singapore quotes, compared with a discount of 24 cents on Thursday. The overall gasoil market is under pressure at the moment as stocks are building with regional refineries returning from planned turnarounds and China is exporting more, while demand is lackluster due to a seasonal drop in consumption during monsoon.
Domestic diesel sales in India dropped about 3 percent to 7.33 million tonnes in June from 7.55 million in May. The June sales, however, were up about 8 percent from the same month last year. India’s diesel demand typically takes a hit during monsoon months as travelling in some parts of the country gets curtailed due to heavy rains, which also reduce the need for diesel used in irrigation pumps.
Meanwhile, jet fuel cash premiums dropped to the lowest for this week on Friday, and were at 5 cents a barrel to Singapore quotes, down from 13 cents a barrel on Thursday. Jet margins over Dubai crude fell to as low as $14.25 during Asian trading hours.
The July crack is higher at $ 12.65 / bbl with the 10 ppm crack at $ 13.55 /bbl. The regrade is lower at $ 1.50 /bbl.
The August crack is at $ 13.20 / bbl with the 10 ppm crack at $ 14.10 /bbl. The regrade is at $ 1.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s fuel oil market firmed with the August 380-cst fuel oil crack and front-month time spread being bid higher on Friday. Shrinking fuel oil inventories across key global storage hubs, lower output and firm seasonal demand for power generation have helped boost sentiment in the fuel oil market and restrict arbitrage flows into Singapore and Asia.
The August 380-cst barge crack to Brent crude was trading at a discount of about $8.35 a barrel on Friday, up from about minus $8.80 a barrel in the previous session. Similarly, the 380-cst time spread for August/September climbed to a premium of about $6.80 per tonne on Friday, up from about $6.50 a tonne on Thursday.
The July crack is higher at -$ 1.05 / bbl with the visco spread down to $ 0.95 /bbl
The August crack is higher at -$ 1.50 / bbl with the visco spread at $ 1.30 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The August Fuel Oil crack has come to a truly exceptional level. Notwithstanding the losses in our prior hedges, this is the time to lock in another tranche of the crack at the current value of -$1.50 / 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.