Crude Oil
Oil prices skyrocketed this morning after a weekend after drones attacked the world’s most important crude processing facility at Abquaiq and the nearby oil field Khuras, on Saturday morning. Roughly about 5.7 mbpd of Saudi’s crude processing facility was affected. Saudi Aramco says it expects to restore around a third of this capacity by the end of today. Brent crude futures jumped to as high as $ 71 / bbl before retracing to around $ 66 /bbl at the time of writing
The US president said on Sunday that the US was “locked and loaded” for a potential response to the attack on Saudi Arabia’s oil facilities, after a senior official in his administration said Iran was to blame. Iran, on its part, dismissed accusations by the US that it was behind attacks on Saudi oil plants and warned on Sunday that Iran was ready for “full-fledged” war and that US bases and aircraft carriers in the region were in range of its missiles. Nevertheless, the White house has not ruled out a meeting between President Trump and the Iranian President.
Prior to the weekend’s events, prices had continued to drift lower on poor investor sentiment and finished negative for the week. Brent crude futures settled 16 cents lower at $ 60.22 /bbl. WTI crude futures settled 24 cents lower at $54.85 /bbl.
Brent fell 2.1% for the week, its first decrease in five weeks. WTI lost about 3% loss for the week, its first decrease in three weeks.
U.S. energy firms this week reduced the number of oil rigs operating for a fourth week in a row, cutting five rigs this week and bringing the total down to 733, the lowest since November 2017.
Hedge funds and other money managers its combined futures and options position in New York and London by 30,249 contracts to 209,549 in the week to Sept. 10, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
Naphtha
Asia’s naphtha crack edged up to a three-day high of $23 a tonne due to a drop in feedstock oil prices.
Fundamentals for naphtha, however, were weak as supplies have persistently outpaced demand and kept spot prices for open-specification grades mostly at discount levels. Malaysia-based Titan cancelled a tender to buy naphtha for second-half October delivery but the reasons were not clear.
Naphtha spot demand this week through tenders has been slow as a major annual oil event in Singapore from Monday to Wednesday this week drew participants away from the market..
The October crack is lower at – $ 6.90 / bbl.
Gasoline
Asia’s gasoline crack hovered near a two-month high on Friday at $8.10 a barrel.
ARA gasoline inventories rose by 137 kt to 1.08 million tonnes.
The October crack is at $ 6.75 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a discount of 12 cents a barrel to Singapore quotes on Thursday, the lowest since July 12. They were at a discount of 8 cents a barrel on Thursday.
Another factor supporting the gasoil market sentiments is increasing scope of arbitrage opportunities from the region. More Asian gasoil is expected to head to Europe as buyers take advantage of the biggest seasonal price gap between the two regions in at least seven years.
The gasoil EFS traded around minus $21 per tonne on Friday. The arbitrage is usually profitable when the EFS trades at about minus $15-18 a tonne or below. European diesel imports from Asia were expected to reach around 2 million tonnes in September, similar to last month’s level.
ARA gasoil inventories dropped by 28 kt to 2.84 million tonnes.
Cash premiums for jet fuel edged higher by 1 cent to 29 cents a barrel to Singapore quotes on Friday.
The October crack for 500 ppm Gasoil is at $ 16.75 /bbl with the 10 ppm crack at $ 17.45 / bbl. The regrade is at + $ 0.50 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s cash premium for 380-cst fuel oil climbed to a new record on Friday, backed by persistent demand for physical cargoes amid scarce supplies.
The HSFO cash premium surged to $46.22 per tonne above Singapore quotes, up from the previous high of $45.75 per tonne hit on Thursday. The spot premiums for the residual fuel have gained about 19% this week alone, and have increased more than four times in the last month. The prompt-month spread for 380-cst HSFO remained in steep backwardation on Friday to trade at a premium of $56.25 a tonne.
The 380-cst barge crack to Brent crude for October rose to minus $18.88 a barrel during Asian trade on Friday, against minus $20.60 on Thursday. The 380-cst barge crack has risen about 8% this week, its first weekly gain in three weeks.
The October 180 cst crack is higher – 3.15 / bbl with the visco spread at $ 1.00 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Most of the cracks in the prompt seem to have been suppressed due to the jump in crude prices. However, FO cracks are still stronger in the prompt. We will add one more tranche of 180 cSt-Dubai for October at the current levels of -$3.15. Right now, in this volatility, it is not clear which way markets will move. The hedge is just locking in a good margin for this season.
Cal20 middle distillate cracks have spiked. Ostensibly due to demand for the product in the IMO 2020 era. Our opinion is that we will stick to current hedging principle unless there is stronger evidence to the contrary.
Accordingly, we will lay a hedge for Cal 20 10ppm Gasoil Dubai crack at $ 20.05, the current levels today.
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.