Crude Oil
Oil prices settled lower on Wednesday as US crude stocks rose again and doubts about the pandemic continued.
Brent futures fell 25 cents to settle at $40.71 a barrel. WTI crude fell 42 cents to settle at $37.96 a barrel.
OPEC+ technical experts made no recommendation on further extending a record oil supply cut in talks on Wednesday and decided to focus on compliance of laggards in the deal ahead of ministerial talks on Thursday, OPEC+ sources said.
US shale producers are expected to restore roughly 0.5 MB/D of crude output by the end of Jun’20, according to crude buyers and analysts, amounting to a quarter of what they shut since the onset of the coronavirus pandemic.
Saudi Aramco has completed its purchase of a 70% stake in petrochemicals company Saudi Basic Industries for $69.1 billion and extended the payment period by three years to 2028, providing a cushion against weak oil prices.
France’s economy should contract 17% in Q2’20 after a previous forecast last month of a 20% contraction as business activity began recovering in May’20 after a nationwide lockdown was eased, the INSEE forecast on Wednesday.
In a withering behind-the-scenes portrayal, the US President’s former national security adviser John Bolton accused him of sweeping misdeeds that included explicitly seeking Chinese President Xi Jinping’s help to win re-election.
DOE Data
U.S. crude inventories rose to a record high last week for a second straight week, reaching more than 539 million barrels. Conversely, distillate stockpiles fell following weeks of significant builds, government data showed.
U.S. crude production fell by 600 kbpd last week to 10.5 million bpd, its lowest since March 2018. Some of that was due to Storm Cristobal, which shut more than one-third of U.S. offshore output.
U.S. fuel demand, as measured by product supplied, is down 20% over the past four weeks from a year earlier, the government said.
The material balance statement continues to be wildly out of sync for crude. We guess it will right itself some day.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 450,452 (+5,264 DoD) yesterday, with the total number of confirmed infections at 8,393,066 (+141,872 DoD). (Click here for details).
The World Health Organization said it would update its guidelines after results showed the corticosteroid medication dexamethasone cut death rates among severely ill COVID-19 patients. However, the virus is spreading in parts of the United States, while flights were cancelled and schools were shut in Beijing to head off a new virus outbreak in the Chinese capital.
Naphtha
Asia’s naphtha crack eased to a two-session low of $62.23 a tonne over Brent crude as high oil prices weighed.
Asia, however, is expected to receive fewer naphtha cargoes from Europe/Mediterranean and the United States in July with the volumes seen at a three-month low of 1.8 million tonnes.
Japan’s naphtha imports in the meantime were seen down from a year ago but higher month-on-month. Japan imported 1.14 million tonnes of naphtha in May, higher than April’s 1 million tonnes but 8% lower than a year ago, government figures showed on Wednesday.
But Japan’s output of ethylene, made from naphtha, at 438,400 tonnes in May was lower than April’s 464,800 tonnes. It was also about 12.5% lower than May 2019
The July crack is higher at -$0.05 / bbl.
Gasoline
Asia’s gasoline crack also eased to a two-session low of $2.73 a barrel over Brent crude.
The July crack has jumped to $5.95 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s jet fuel refining margin stayed below $3 a barrel for the fifth straight session on Wednesday, dragged down by limited demand for air travel despite easing lockdown measures as people mostly took to roads instead of skies. The last time jet fuel cracks were above $3 was on June 10, when they were at the highest since March 30.
Air demand suffered another setback after a resurgence of coronavirus infections in China’s Beijing. China’s capital cancelled scores of flights, shut schools and blocked off some neighbourhoods as it ramped up efforts to contain a coronavirus outbreak that has fanned fears of wider contagion.
The July crack for 500 ppm Gasoil is steady at $6.55 /bbl with the 10 ppm crack at $ 7.40 / bbl. The regrade is at -$ 3.65 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month 380-cst high-sulphur fuel oil (HSFO) crack discount against Dubai crude was at its widest in over two weeks on Wednesday despite weaker crude prices. But downside risk was seen as limited amid tight supplies of the fuel and increased refining feedstock demand and seasonally higher use in power generation during the summer months.
Meanwhile, fuel oil stocks held in Fujairah oil hub slipped 0.5% in the week to June 15, inching away from a record high in the previous week. Fujairah inventories for heavy distillates and residues were 78 kb lower than the previous week at 17.09 million barrels in the week to June 15, data via S&P Global Platts showed. Compared with year-earlier levels, the inventories were 67% higher.
China’s fuel oil output jumped to 3.83 million tonnes in May, up 98% from last year, according to data released by the National Bureau of Statistics on Wednesday. Fuel oil production for the January-May period totalled 14.263 million tonnes, up 47% from the same period last year. This came as China’s refinery throughput in May increased 8% from last year to 57.904 million tonnes. In April, China’s fuel oil output was at 3.087 million tonnes, up 68% from last year.
The July crack for 180 cst FO is steady at – $2.65 /bbl with the visco spread at $1.35 /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 refinery.
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.