Crude prices strove to rise higher in anticipation of agreement in OPEC but the rally ran out of steam in the face of increased crude stockpiles and a stronger US$
Brent settled lower by 14 cents / bbl at $ 46.49 /bbl after being up by over $ 1/bbl over the previous settle during the day. WTI settled at $ 45.42 / bbl, down 15 cents.
Crude oil is trading approximately 50 cents lower this morning
We are of the opinion that crude prices eventually will rise due to more fundamental reasons than stories being put out by OPEC. But this is not THAT rally.
Naphtha gained in strength as demand appeared to outstrip supply that is expected to land in December. The market now expects retention of naphtha supplies in the west for petchem manufacture as LPG gets diverted to heating during the window.
The December crack jumped by 50 odd cents showing a value of $ 2.10 /bbl or 15 cents higher.
Gasoline prices seemed to have jumped on the back of the increased demand for Naphtha. The crack for December has shot up to above $11 / bbl , an increase of more than $ 1/bbl
Middle distillate cracks to firmed up marginally by around 20 cents. The gasoil crack for December is valued at around $ 11.65 /bbl
Middle distillate stocks in Singapore decreased by 1.9 million barrels to a nearly 4 month low of 12.4 million barrels.
Domestic demand for Kero in Japan is increasing as refiners have started to purchase from storage tanks in Korea.
The regrade in January continues to show value of $ 1.35 /bbl
Fuel oil stocks rose by close to 500 KT, a build of over 15% and the largest build since May 2016.
Nevertheless, the product maintained its strength due to shortage of supplies in the immediate future.
Going forward, there are mixed reactions about where the market should be. Over the short to medium term, there is a structural destruction of fuel oil happening as refineries opt for more complex structures. On a longer term though, the demand for cleaner fuel is going to make this product redundant.
Our opinion is that the current demand for the product notwithstanding, these levels are too high to be sustainable for an extended period of time.
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.