Crude Oil
Oil prices once again rose over 1% on Friday, posting their first weekly gain since early January as investors bet the economic impact of the coronavirus would be short-lived. Brent futures rose 98 cents to settle at $57.32 a barrel. WTI crude futures rose 63 cents to settle at $52.05 a barrel.
Brent rose 5.23% for the week while WTI rose 3.2%. This was the first weekly increase in six weeks.
Brent has fallen around 15% year to date in part due to worries the coronavirus outbreak would stunt the global economy. The death toll from the COVID-19 in mainland China rose to 1,772 (+106 DoD) yesterday, with the total number of confirmed infections at 70,636 (+2,052 DoD). However, market sentiment improved as factories in China started to reopen and the government eased monetary policy in the world’s second largest economy. The WHO said that the jump in China’s reported cases did not necessarily mean a wider epidemic but reflected a decision to reclassify a backlog of suspected cases.
However, it should be recognized that even if the Covid 19 outbreak is contained soon, it may be a while before its economic effects are fully overcome. The IEA said that the outbreak should knock first-quarter oil demand down from a year earlier. Such a scenario has not been seen since the financial crisis in 2009.
Japan’s economy shrank at the fastest pace in almost six years in the Q4’19, shrinking 6.3% against the forecast of -3.7%, as last year’s sales tax hike hit consumer and business spending, highlighting a fragile outlook made worse by growing coronavirus risks.
Singapore cut its 2020 growth and exports forecasts due to an expected economic blow from the new coronavirus outbreak, downgrading its GDP forecast range to -0.5% to 1.5%, from 0.5% to 2.5% previously, opening up the possibility of a recession.
Jan’20 was the warmest January on record across the northern hemisphere, sending demand for heating oil, natural gas and coal plunging, with land surface temperatures 2.44⁰C above the average for the same month between 1901 and 2000, the largest positive anomaly for at least 140 years.
US energy firms added oil rigs for a 2nd week in a row, adding 2 rigs to total 678 (-179 YoY).
Money managers cut their net long U.S. crude futures and options positions in the week to Feb. 11 by 15,446 contracts to 147,071, the U.S. Commodity Futures Trading Commission (CFTC) said.
Naphtha
Asia’s naphtha crack dropped 18.6% on Friday to reach an almost 6-week low of $72.70 a tonne, dragged down by high oil prices and weak petrochemicals demand.
The March crack has dropped to – $ 2.45 / bbl.
Gasoline
Asia’s gasoline crack fell to a one-week low of $7.36 a barrel.
China’s auto market, the world’s largest, is likely to see sales slide more than 10% in the first half of the year because of the Covid 19 virus, the China Association of Automobile Manufacturers (CAAM), said. Its forecast is grimmer than an initial prediction made last month for a 2% dip in sales this year.
The IEA said it had lowered its Chinese gasoline demand forecast for this quarter by 13% or 420 kbpd but said it expects demand could receive some support next quarter from people avoiding public transport.
Exxon Mobil Corp does not have a timeline for restarting fuel-producing units at its 502,500 barrels per day (bpd) Baton Rouge, Louisiana, refinery, its second-largest in the U.S., following a fire on Wednesday. The outage has led to costlier gasoline prices in the U.S.
Gasoline stocks in ARA rose by 114 KT to 1.24 million tonnes, a level last seen in August 2019,
The March crack is slightly higher at $8.50 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil were at 58 cents a barrel to Singapore quotes on Friday, compared with 66 cents on Thursday.
Gasoil stocks in ARA fell by 104 KT to 2.37 million tonnes, a 4 week low.
Cash differentials for jet fuel were at a discount of 10 cents a barrel to Singapore quotes, compared with 9 cents on Thursday. The February-March time spread for the aviation fuel in Singapore remained in contango to trade at a discount of 18 cents a barrel.
The virus outbreak is curbing travel demand across the whole Asia Pacific region, with the impact on future bookings spreading beyond China.
The March crack for 500 ppm Gasoil is marginally lower at $11.30 /bbl with the 10 ppm crack at $ 12.20 / bbl. The regrade is at -$ 1.30 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The March/April VLSFO time spread rose to $1.75 a tonne on Friday, up from $1.50 a tonne in the previous session but down from $3.75 at the start of the week. On Wednesday, the front-month time spread sank to a one-month low of $1.25 a tonne.
January sales of marine fuels in Singapore jumped to a two-year high of 4.515 million tonnes on Friday, following the introduction of stricter global rules on ship fuels at the start of the year. Sales of IMO-compliant low-sulphur fuels represented 83% of the overall January sales volumes totalling a record 3.743 million tonnes.
Fuel Oil stocks in ARA were only 2 KT lower at to 1.11 million tonnes in the week ended 13 Feb.
The March 180 cst crack has improved to -$ 7.90/ bbl with the visco spread at $ 1.30 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for 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.