Oil prices rose on Tuesday, as support from the possibility of supply disruptions and a strong equities market offset the effects of profit-taking following last week’s rally above three-year highs. Brent crude oil futures gained 16 cents to settle at $71.58 /bbl, while U.S. crude futures rose 30 cents to settle at $ 66.52 /bbl.
In other news, Russia and Iran are discussing an extension of its oil-for-goods deal by another five years, according to the Russian Energy Minister. Under the deal, Russia gets up to 5 million tons per anum of crude. This is likely to be one of many ways the impact of sanctions on both countries will be mitigated.
The IMF has forecast strong world economic growth for the next two years, but highlighted that risks have already begun to grow. Beyond 2019, IMF projected global growth to slow as central banks tighten monetary policy, US fiscal stimulus subsides, and China’s gradual slowdown continues. IMF expects US to grow 2.9% this year, an upgrade of 0.2% from prior forecasts, and that the euro area will grow 2.4% this year. China is expected to grow 6.6% while India will grow 7.4%.
The data released by the API last afternoon is expected to be bullish for the market with a draw in crude when markets were expecting a build. Gasoline stocks too dropped more than expected by the market.
Crude prices have ralied this morning and, should the data be confirmed by the DOE, should rally even further this evening.
Asia’s naphtha crack extended losses to settle at $ 69.80 /MT dragged down by firm Brent crude prices and upcoming maintenance at naphtha crackers which would hit demand. The weaker fundamentals were reflected in physical trades which were reported to have occurred at premiums of $ 7.50 /MT over CIF Japan quotes. This is much lower than the levels of nearly $ 15/MT at which trades were happening around two weeks ago.
The May crack is steady at -$ 1.60 /bbl
Asia’s gasoline crack to Brent recovered marginally to settle at $6.24 /bbl. Supplies, nevertheless, remained ample due to overall high refinery throughput..
The May crack is marginally lower at $ 10.35 /bbl
Asia’s jet fuel cash differentials slipped on Tuesday, while the front month spread narrowed its backwardated structure. Cash premiums for jet fuel dipped to 97 cents a barrel to Singapore quotes on Tuesday, down from 99 cents a barrel on Monday. The jet fuel market is a bit subdued at the moment as traders are waiting on the sidelines to gauge whether summer aviation demand will be able to sustain the recent strength in prices..
Meanwhile, cash premiums for 10ppm gasoil edged up to 26 cents a barrel to Singapore quotes, compared with 25 cents on Monday.
The May gasoil crack has dropped to $ 14.45 /bbl with the 10 ppm crack at $ 15.05 /bbl. The regrade has has dropped to $ 0.90 /bbl.
Cash premiums of Asia’s 180-cst and 380-cst high-sulphur fuel oil extended gains on Tuesday, boosted by concerns of near-term supply constraints. Cash premiums of 180-cst fuel oil jumped to their highest since May, while premiums of the mainstay 380-cst fuel oil rose to a more than two-month high
The May 180 cst crack has however dropped to -$ 6.05/ bbl. with the visco spread wider $ 1.80 /bb
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.
Yesterday, we had recommended hedging the May at $1.50 /bbl. Today it has crashed to $ 0.95 /bbl. THAT is the main reason one hedges. To take advantages of spikes in prices to protect margins.
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.