Crude Oil
Oil futures fell more than 1% on Wednesday after U.S. government data showed large builds in refined product stockpiles. Brent crude futures were down 69 cents to settle at $63.66 a barrel. WTI crude futures fell 84 cents to settle at $56.78 a barrel. Both benchmarks shed more than 3% on Tuesday. .
While data on Wednesday from the U.S. Energy Information Administration showed a larger-than-expected drawdown in crude stockpiles last week, large builds in refined product inventories kept prices lower.
U.S. officials say they are unsure whether an oil tanker towed into Iranian waters was seized by Iran or rescued after facing mechanical faults as Tehran asserts, sowing confusion at a time of high tension in the Gulf.
The IMF said on Wednesday the USD was overvalued by 6% to 12%, based on near-term economic fundamentals, while the euro, the Japanese yen and China’s yuan were seen as broadly in line with fundamentals.
DOE data
While crude stocks have shown a larger draw, the draw is certainly a lot less than expected given the shut downs for the second half of the week.
The build in gasoline and distillate stocks, while different from that reported by the API is directionally in synch with our material balance statement.
The builds in gasoline stocks are mainly due to a drop in demand of 540 kb / d. Most of this drop would be caused due to Hurricane Barry. The build in distillate stocks would be more due to a drop in exports. While the builds appear overstated, this could be due to compensation from previous weeks.
Naphtha
Asia’s naphtha crack recovered to a two-session high of $27.40 a tonne after falling to a 2-1/2 week low in the previous session as weaker Brent crude prices gave refiners some reprieve.
The August crack is higher at -$ 5.45 /bbl
Gasoline
Gasoline crack also recovered to a two-session high of $7.57 a barrel. Fundamentals of petrol have been much stronger compared to a month ago when margins were below $2 a barrel.
Light distillate stocks in Fujairah rose by 841 KB to 8.1 million barrels.
The August crack is lower at $ 8.00 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a premium of 14 cents a barrel to Singapore quotes, compared with a narrow discount of 1 cent a barrel on Tuesday.
Asia’s cash differentials for 10 ppm gasoil flipped into premiums on Wednesday, for the first time in over three weeks, helped by firmer deal values in the physical trade window. The gasoil market, however, may lose support as there are still ample supplies in the region, and more barrels are expected to hit the market in the near term.
The Gasoil EFS was around minus $6 per tonne on Wednesday which means that the arbitrage is firmly shut.
Cash premiums for jet fuel dipped to a premium of 13 cents a barrel to Singapore quotes on Wednesday, from 18 cents a barrel on Tuesday.
Cash differentials for jet fuel slipped on Tuesday to a premium of 18 cents a barrel to Singapore quotes, down from 26 cents a barrel on Monday.
Middle distillate stocks in Fujairah rose by 139 KB to 2.31 million barrels. Stocks continue to remain at a seasonal low for this time of the year.
The August crack for 500 ppm Gasoil is higher at $ 15.70 /bbl with the 10 ppm crack at $ 16.40 / bbl. The regrade is at +$ 0.05 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s high-sulphur fuel oil market clawed back this week’s losses with renewed buying interest lifting 380-cst HSFO cash premiums and times spread higher on Wednesday.
380-cst cash premiums jumped to a four-session high of $20.22 a tonne to Singapore quotes, and up from a five-session low of $17.80 a tonne on Monday.
Similarly, the Aug/Sept 380-cst time-spread climbed to a two-session high of$28.50 a tonne on Wednesday, up from a one-week low of $27 a tonne on Tuesday.
Meanwhile, fuel oil inventories in the Fujairah oil hub fell by 1.2 million barrels to 8.6 million barrels, a more than four-month low this week. Above average weekly exports contributed to Fujairah declining fuel oil inventories. The lower inventories come despite shrinking bunker fuel sales there in recent weeks.
The August 180 cst crack has strengthened further to + $ 1.40 / bbl with the visco spread at $ 1.10 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The rapid return in strength of the 180 cSt – Dubai crack prompts us to reinstate a hedge for August at current values of + $ 1.40 /bbl.
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.