Crude Oil
Oil prices tumbled about 6% on Tuesday after Saudi Arabia’s energy minister said the country has managed to restore oil supplies to where they stood before the weekend attacks. Brent crude futures sank $4.47, or 6.5%, to settle at $64.55 a barrel. WTI crude futures fell $3.56, or 5.7%, to settle at $59.34 a barrel.
During a news conference on Tuesday, Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom has recovered supplies by tapping inventories, and lost oil output of 5.7 million barrels per day (bpd) by the end of September.
State-owned producer Saudi Aramco told some Asian refiners it would meet its oil commitments, albeit with changes.
The prospect of releases from strategic oil reserves in the United States, and other industrialized countries that the International Energy Agency advises, such as Japan, have weighed on prices, but the geopolitical threat of retaliation is causing concerns.
U.S. Vice President Mike Pence said the United States was reviewing evidence that suggests Iran was behind the attacks. Washington believes the attacks originated in southwestern Iran.
Tehran has, on Tuesday, ruled out talks with Trump. Saudi King Salman called on world governments to confront threats to oil supplies.
api data
The rise in crude stocks appears to have been in the face of market estimates for a draw. We had anticipated a bigger build than what is reported. Official data will be released later today.
Naphtha
Asia’s naphtha crack almost doubled to $64.70 a tonne as attacks on Saudi oil facilities crippled supplies of refined oil products as well as crude oil.
Asia was previously hit by a persistent oversupply of naphtha, prompting sellers to provide maximum nomination of cargoes to buyers. This will change as supplies from Saudi Aramco are expected to fall although this could not be independently confirmed and buyers may need to plug the supply gap with spot cargoes.
Even LPG supplies from Saudi, which sets the contract prices of butane and propane could also be affected as Saudi Aramco has already delayed announcing its October LPG nominations to Sept. 18 from Sept. 16.
Operations at Saudi Arabia’s SASREF and PetroRabigh oil and petrochemical refineries have been slashed by up to 40% following the attacks over the weekend which had halved the kingdom’s productions.
The October crack has jumped to – $ 3.45 / bbl.
Gasoline
Asia’s gasoline crack rose almost 10 percent to $9.56 a barrel on Tuesday, its highest since August 2018. while naphtha crack
The October crack is steady at $ 8.05 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a discount of 11 cents a barrel to Singapore quotes on Tuesday, compared with a 7-cent discount on Monday.
Cash premiums for jet fuel were at 23 cents a barrel to Singapore quotes on Tuesday, compared with 32 cents a barrel on Monday.
The front-month time spread for jet fuel widened its backwardated structure on Tuesday to trade at $1.10 a barrel, up from 53 cents in the previous session.
The October crack for 500 ppm Gasoil is at $ 17.55 /bbl with the 10 ppm crack at $ 18.25 / bbl. The regrade is at + $ 1.10 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s cash premium for 380-cst fuel oil cargoes soared to a fresh record high on Tuesday, while the front-month spread widened further.
The cash premium for 380-cst HSFO in Singapore rose to $61.63 per tonne above Singapore quotes, up from a previous high of $59.19 per tonne hit on Monday.
Fuel oil supplies are tight as traders are not bringing in cargoes to the region as the market is in steep backwardation.
The October/November time-spread for 380-cst HSFO widened to trade at a premium of $82 a tonne, compared with $70.50 a tonne on Monday. The already tight supplies might shrink further in the coming days as exports from Saudi Arabia is expected to drop.
The October 180 cst crack has jumped further +$ 4.45 / bbl with the visco spread at $ 1.00 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The Fuel Oil crack continues to sky rocket. We will add one more tranche of 180 cSt-Dubai for October at the current levels of $ 4.45. We don’t know how much higher this will go. However, one this is sure that when the turn around happens, it will be swift and harsh. Hence we have to continue hedging.
Even as the prompt gasoil crack keeps rising, the back end has eased off and we can close out the last tranche of Cal20 10ppm Gasoil-Dubai crack that we had hedged above $ 20 / bbl.
We would also like to hedge the 4Q19 Regrade at $ 1.10 / bbl, a level that has not been seen in a long time. Since October is around the corner, we are recording these as 3 hedges for October, November and December respectively.
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.