Crude Oil
Oil prices rose about 1% on Thursday in a late afternoon rally the reasons for which are not exactly clear. Brent crude gained 49 cents to settle at $59.91 a barrel. WTI crude rose 55 cents to $53.07 / bbl.
News sources attribute the rise to the fall in product inventories, but a series of weak economic figures would seem to bely that.
Adding to concerns about the global economy, and therefore energy demand, U.S. retail sales fell for the first time in seven months, while housing starts and industrial output dropped as well. Earlier data showed a moderation in job growth and services sector activity.
China’s economic growth slowed more than expected to 6.0% YoY in the Q3’19, the weakest pace in at least 27-1/2 years, as demand at home and abroad faltered amid a bruising Sino-US trade war.
Brexit developments gave oil prices some support. European Union leaders gave their unanimous backing to a Brexit deal with Britain on Thursday, putting the onus on Prime Minister Boris Johnson to secure the British parliament’s approval for the deal in a vote in two days.
The US Trade Representative’s office told industry that its planned 10% tariffs on Airbus planes and 25% tariffs on selected EU goods valued at $7.5 billion would take effect as planned on 18 Oct’19, after the WTO authorized the move this week.
The US Energy Secretary, Rick Perry, will step down by the end of the year, the US President said on Thursday, a day before a deadline set by congressional Democrats for Perry to turn over documents in the impeachment probe.
Saudi Aramco has delayed the planned launch of its initial public offering in hopes that pending third-quarter results will bolster investor confidence in the world’s largest oil firm, two sources familiar with the matter said on Thursday
DOE data
The huge crude build was the result of a reduction in refining output for the week to its lowest capacity use nationwide since Hurricane Harvey in September 2017. Refining capacity use fell to 83.1% as refiners shut in capacity across the country. Net imports also fell by close to 225 kb
Both product draws are at odds with our material balance report above. Having said that, there was a pretty impressive growth in demand for distillates this week.
Naphtha
Asia’s naphtha crack dropped for a second day on Thursday to a one-week low of $88.25 a tonne, while the intermonth time spread eased to a three-session low of $24.50 a tonne as shrinking petrochemical margins may curb demand for the fuel.
The intermonth timespread shot to more than a 6-1/2 year high of $27 a tonne on Oct. 15 and despite easing, the current value is still sharply higher than the average of $3.60 for January to September. Spot premiums had shot to $30 a tonne to Japan quotes on a cost-and-freight (C&F) basis, sharply contrasting the discount levels between June and first-half September. But petrochemical prices such as those for ethylene were not catching up, the sources added.
Petrochemical margins have been severely hit and there were concerns that this could hamper naphtha demand. Additionally, buyers who are able to use alternative liquefied petroleum gas (LPG) to partially replace naphtha will likely continue to do so into the winter months even though LPG typically becomes more expensive during winter because it is also a fuel used for heating.
The November crack is lower at – $ 2.50 / bbl.
Gasoline
Asia’s gasoline crack fell to a two-week low of $8.60 a barrel on high stockpiles. Singapore’s onshore light distillates stocks surged by 1.17 million barrels to hit a five-week high of 10.934 million barrels in the week ended Wednesday, data from Enterprise Singapore showed.
The November crack is higher at $ 7.95 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10ppm gasoil were at $1.57 a barrel to Singapore quotes, compared with a premium of $1.66 a barrel on Wednesday.
Meanwhile, cash differentials for jet fuel widened their discounts to 5 cents a barrel to Singapore quotes, their weakest levels since mid-August. They were at a discount of 1 cent a barrel to Singapore quotes on Wednesday.
Adding to gasoil market strength, Singapore onshore inventories of middle distillates fell by 2.1 million barrels to 9.19 million barrels, their lowest levels in five months.
The November crack for 500 ppm Gasoil has dropped to $ 16.80 /bbl with the 10 ppm crack at $ 17.80 / bbl. The regrade is at + $ 0.40 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash premiums for cargoes of Asian 380-cst HSFO climbed to a near two-week high on Thursday, lifted higher by firmer deal values and buying interest in the Singapore trading window. The 380-cst cash premium jumped to $26.94 per tonne above Singapore quotes, up from $23.52 per tonne in the previous session.
Backwardation in the front-month 380-cst time-spread also widened to a near one-week high of $26 a tonne, from $20.75 a tonne on Wednesday.
Residual fuel oil inventories in Singapore climbed by 208 KB to 22.11 million barrels, data from Enterprise Singapore showed on Thursday. This came despite weekly net fuel oil import volumes which were 53% lower from the prior week at 405,000 tonnes, well below the 2019 weekly average of 684,000 tonnes.
The November 180 cst crack is higher at -$ 14.50 / bbl with the visco spread at $ 2.95 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh recommendations 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.
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.