Crude Oil
Oil prices continued rising on Monday, as investors bet the economic impact of the coronavirus would be offset by deeper production cuts by the OPEC+ group.. Brent futures rose 35 cents to settle at $57.67 a barrel. WTI crude futures were up 23 cents at $52.28 a barrel. The US was closed due to the President’s day holiday.
There are some indications of prompt demand for oil as the front-month Brent futures market has shifted to a backwardation from a contango. Investors are basically anticipating that the OPEC+ groupwill approve a proposal to deepen production cuts to tighten global supplies and support prices.
Our expectation is that the group would agree to lengthen the period of the last round of cuts rather than deepen cuts further, mainly because of the logistical issues involved therein. Therefore, the impact of such decisions are not likely to push prices much higher. Brent prices falling into backwardation currently seems to be a chimera of a demand that doesn’t currently exist.
Naphtha
Asia’s naphtha crack dived 16% on Monday to hit a 4-1/2 month low of $60.88 as a weaker economic outlook weighed.
Japan is on the brink of a recession. Thailand’s economic growth slipped to a five-year low and Singapore has cut its 2020 growth and exports forecast.
Japan imported close to 1.36 million tonnes of naphtha in January, making that a two-month low, data from the Ministry of Economy, Trade and Industry showed. Japan had imported a total of about 13.6 million tonnes of naphtha in 2019, down from around 13.9 million tonnes in 2018.
The March crack has dropped to – $ 2.80 / bbl.
Gasoline
Asia’s gasoline extended losses for the second straight session on Monday to touch a 1-1/2 week low of $7.05 a barrel.
The March crack is lower at $7.80 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil dipped to 48 cents a barrel to Singapore quotes on Monday, down from 58 cents a barrel on Friday.
Cash differentials for jet fuel were at a discount of 12 cents a barrel to Singapore quotes, compared with a 10-cent discount of Friday.
The March crack for 500 ppm Gasoil slumped to $10.35 /bbl with the 10 ppm crack at $ 11.25 / bbl. The regrade is at -$ 1.20 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month time spread for 0.5% VLSFO flipped into contango on Monday, falling to a near three-month low. The front-month spread is now at its lowest since Nov. 29 and was at plus $1.75 a tonne on Friday. Asia’s VLSFO market has retreated from its record highs near the start of the year, on weakening demand under seasonal factors and the epidemic in China.
Cooling VLSFO prices are also an early sign of stabilizing market fundamentals after months of volatility sparked by adoption of new global marine fuel rules.
The March 180 cst crack has dropped to -$ 8.65/ bbl with the visco spread at $ 1.10 /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.
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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.