Oil prices edged higher on Wednesday, buoyed by a U.S. equity market rally, but gains were limited by data showing growing U.S. refined product inventories and record crude production. Brent crude rose 68 cents to settle at $61.32 a barrel. U.S. crude futures settled 20 cents higher at $52.31 a barrel..
Crude prices took heart from Wall Street’s main indices hitting a one month high as also a statement from Russia’s deputy energy minister saying the country will reach its oil output target reduction in April.
There also appears to be a will to end the deadlock on the tariff issue with China. U.S. Trade Representative has assured lawmakers that companies will be able to request exclusions on tariffs on $200 billion worth of goods under discussion with Beijing if talks do not yield a deal by the 2nd March deadline.
Apart from this, China is taking measures to stimulate its economy. China central bank PBOC made the biggest daily net fund injection via open market operations on Tuesday by injecting 560 billion yuan on a net basis. It also said it wouldmake another big cash injection through open market operations on Thursday.
On the supply side, Libyan oil firm Waha Oil, which feeds the Es Sider export port shut by bad weather, has cut production by 88kbpd as a result of the closure according to NOC. East Libyan forces have launched a military operation in southern Libya to secure oil and gas facilities and fight extremists, a move that may alarm the authorities in Tripoli in the west.
Notwithstanding all the above bullish news, the market is still circumspect about economic growth. White House estimates showed on Tuesday that the U.S. economy is taking a larger than expected hit from a partial government shutdown. The outlook for the global economy darkened further after Britain’s parliament on Tuesday shot down Prime Minister Theresa May’s deal to leave the European Union.
The EIA reported a small drop in crude stocks for the week ended 11th January. However, that was offset by huge builds in both Gasoline and Distillate stocks.
Crude stocks drew despite crude production rising last week to a record 11.9 million barrels per day. This was offset by drop in net imports to the tune of 1.2 mb /d. U.S. crude output is expected to grow this year to a record beyond 12 million bpd, with the country turning into a net crude exporter in late 2020, the EIA said on Tuesday.
The drop in crude stocks is attributable primarily to the huge drop in net imports. The material balance data suggests that crude stocks may have dropped further than reported. Gasoline stocks were at the highest weekly level since February of 2017 repeated the scenario in Europe as well as Singapore. Distillate stockpiles, which which would see to suggest that distillate stocks actually drew last week.million barrels, now higher than last year’s level at this time of the year. There was a huge surge in demand for distillates of nearly 1.5 million barrels / day
No fresh news on the Naphtha market today.
The February crack has dropped to -$ 5.15 /bbl.
No fresh news on Gasoline markets today. Stocks in Fujairah dropped by 418 kb to 10.32 million barrels. Stocks, nevertheless are nearly twice the level of last year.
The February crack has dropped to $ 0.50 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash discounts for gasoil with 10ppm sulphur content widened by a cent to 40 cents a barrel to Singapore quotes.
Cash differentials for jet fuel widened their discounts to $1.57 a barrel to Singapore quotes, compared with $1.50 a barrel on Tuesday. The current discount levels in the jet fuel market have not been seen since October 2009.
The Chinese New Year early next month should boost holiday passenger traffic in the aviation sector, offering some support to the jet fuel market.
Middle Distillate Stocks in Fujairah have increased by 356 KB to 1.96 million barrels. This is around 12% lower than last year’s levels.
The February crack has dropped to $ 13.95 /bbl with the 10 ppm crack at $14.90 /bbl. The regrade has sunk to $ 0.90 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s front month viscosity spread, the price differential between front month 180 cst and 380 cst high sulphur fuel oil (HSFO) swaps, on Wednesday recovered from a record low in the previous session but ample supplies of low viscosity residual fuel continued to weigh.
Sluggish regional demand for low viscosity residual fuels, including from China, Pakistan and Bangladesh, have contributed to the build-up in supplies of the low viscosity fuels.
The viscosity spread for February was trading at about $2.25 a tonne on Wednesday. On Tuesday, the front month viscosity spread was at its lowest since records began in 2013 at $2 a tonne.
Heavy distillate stocks in Fujairah fell by 676 KB to 7.57 million barrels. Stocks are approximately 9% below the previous year’s level.
The February 180 cst crack has dropped to -$ 0.95 / bbl with the visco spread at $ 0.35 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
The collapse of the regrade yesterday enables us to closes several trades today. Cal 20 cracks have spiked today and we shall watch the market to lay on appropriate hedges.
FO cracks have also eased considerably.
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.