Crude Oil
Oil prices settled mixed on Thursday. Brent crude fell 9 cents to settle at $78.09 a barrel. WTI crude futures settled 40 cents higher at $68.99 a barrel.
For the week, Brent gained around 1.6% while WTI gained 1.8%.
Oil traders are likely to stay focused on potential disruptions to global crude supplies in the upcoming week, as looming U.S. sanctions on Iran are widely expected to lead to a tighter market.
Countering that is the uncertainty caused by the trade dispute between the US and China. The US has slightly stepped back its aggression by reducing the size of the tariff to 10% from 25% as originally planned.
In the immediate future, the number of oil rigs in service increased by 7 to 867.
Last week, prices again attempted to break the barrier of $ 80 / barrel and failed. The subsequent price action has moved prices out of the rising channel from the past few days. We now have a triple top in the weekly charts in the $ 80.00-50 area with a bearish divergence appearing in the oscillators
The MACD in the weekly chart has crossed over from below which is a bullish signal. However, in the monthly chart, the MACD is showing bearish divergences even though prices are up for the month
Trading Strategy
Last week we had recommended going short in the $ 78.75 – $ 79.00 area with a stop above last week’s high to target the 100 DMA of $75.50. If you had not stopped out (which would have been reasonable really), you would be nicely poised. We would recommend holding such shorts with a stop above $ 79.15 and continue targeting $75.50 for now.
Supports and Resistances
The first support lies just below $ 78.00 /bbl at $77.88. Below that, we have supports at $ 77.35 and $ 76.70.
Resistances appear to be at $78.50, then $ 79.15 and then in the $ 80.00 area.
Naphtha
Asia’s naphtha intermonth contango widened for the fourth day to $3.75 a tonne on Friday, making this the steepest contango since Oct. 12 2016 as ample supplies persisted.
Naphtha stocks held independently at ARA rose 10.2 percent to a three-week high of 291,000 tonnes.
The balance September crack is higher at -$ 0.55 /bbl. The October crack is at $ 0.10 /bbl
Gasoline
Asia’s gasoline crack continued to stay weak, settling at $ 7.96 /bbl as the market appeared to be oversupplied.
ARA Gasoline stocks eased by 0.46 percent to 866 KT.
The balance September crack is lower at $ 9.90 /bbl. The October crack is at $ 9.10 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for gasoil with 10ppm sulphur content rose to 58 cents a barrel to Singapore quotes on Friday, up from 51 cents a barrel on Thursday.
Meanwhile, ARA onshore middle distillate stocks for the week to Sept. 13 rose to 2.9 million tonnes, their highest levels in more than five months, data from Dutch consultancy PJK International showed. The rapid rise in global middle distillate stocks since July is surprising, and the trend may have continued all the way into September with inventories building strongly in the U.S, Japan, and ARA, as well as other hubs.
Cash discounts for jet fuel narrowed to 28 cents a barrel to Singapore quotes on Friday, backed by a stronger deal. The discounts were at 40 cents a barrel on Thursday. Jet fuel inventories fell 4 percent to 705 KT.
The balance September crack has risen to $ 15.05 / bbl with the 10 ppm crack at $ 15.85 /bbl. The regrade is lower at – $ 0.65 /bbl.
The October crack is at $ 14.90 / bbl with the 10 ppm crack at $ 15.70 /bbl. The regrade is at $ 0.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash premiums of 380-cst high sulphur fuel oil cargoes edged higher to a two-week high on Friday amid firm buying interest for physical cargoes in the Singapore trading window. Sentiment in Asia’s fuel oil market was improved this week on expectations of tight arbitrage supplies in October amid refinery turnarounds and a backwardated market structure in Singapore. This followed steep losses in the second half of August driven by rising arbitrage supplies into Singapore as strong seasonal demand in the Middle East diverted arbitrage cargoes away from Asia.
While higher fuel oil arbitrage flows into Singapore in September provided some relief after months of supply shortages, a narrow arbitrage window amid a backwardated market structure is expected to limit fuel oil inflows in October.
Weekly fuel oil stock levels in ARAedged up 19 KT, to a seven-week high of 1.281 million tonnes in the week ended Sept. 13
The balance September 180 cst crack is higher at -$ 4.95 / bbl with the visco spread at $ 0.65 /bbl.
The October 180 cst crack is at -$ 4.70 / bbl with the visco spread at $ 1.10 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to report 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.