Crude Oil

Oil prices rebounded from a two-day drop as expectations of further stimulus by central banks helped to ease recession concerns. Brent crude futures settled 41 cents higher at $ 58.64 /bbl. WTI crude futures settled 40 cents higher at $54.87/bbl.


For the week, both oil benchmarks eked out small gains after two consecutive weeks of losses

Oil’s gains were capped after the OPEC on Friday cut its forecast for global oil demand growth in 2019 by 40KB/D to 1.1MB/D and indicated the market will be in slight surplus in 2020. Oil inventories of developed economies in June exceeded the five-year average by 67 MB raising concerns over a possible oil glut. The cartel also highlighted challenges in 2020 as rivals pump more, building a case to keep up an OPEC-led pact to restrain supplies.

Investors continued to worry about the risk of recession and U.S.-China trade tensions. Earlier this week, data releases included a surprise drop in industrial output growth in China to a more than 17-year low, and a fall in exports that sent Germany’s economy into reverse in the second quarter. Japan’s exports slipped for an eight month in July (-1.6% YoY), while manufacturers’ confidence turned negative for the first time in over six years as slowing global growth and the prolonged Sino-US trade war took a toll on the world’s third-biggest economy.

U.S. energy firms this week increased the number of oil rigs operating for the first time in seven weeks. The oil rig count, an early indicator of future output, has declined over the past eight months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.  

Hedge funds and other money managers raised their bullish wagers on US crude in the latest week (+29,981 to 199,562) while cutting their net long positions for Brent (-37,733 to 226,767), a government report showed on Friday


Asia’s naphtha crack was at a three-session low of $19.30 a tonne on Friday as the impact of plentiful supplies and cracker maintenance in August had more influence on the market than demand from South Korea, Japan and Malaysia.

Japan’s Mitsubishi Chemical emerged to buy naphtha for second-half October delivery. The petrochemical maker paid a low-single digit discount per tonne to Japan quotes on a C&F basis, but pegged to 60-day prior price formula, instead of the usual 30-day formula. Other buyers in the market this week include Titan, GS Caltex and Lotte Chem.

In Indonesia, the country’s only naphtha cracker operated by Chandra Asri has been undergoing maintenance since Aug. 1 for 55 days. Taiwan’s Formosa Petrochemical also has maintenance this month at its 1.03 million tonne per year cracker.

The September crack is lower at -6.00 / bbl.


No fresh news on the Gasoline market. ARA Gasoline stocks increased by 39 KT to 1.3 million tonnes in the week to 15th August.

The September crack is lower at $ 6.45 /bbl

Click Here for a graphical depiction of Global Gasoline stocks by region.


Cash premiums for gasoil with 10 ppm sulphur content rose to 39 cents a barrel to Singapore quotes on Friday, the highest since Nov. 7. The gasoil premiums were at 29 cents per barrel a day earlier. Cash differentials for the benchmark gasoil grade in Singapore have more than doubled over the last four sessions.

But traders were still concerned the current strength in the gasoil market would likely not be sustainable as more volumes are expected to come out of China and India in the coming weeks.

China issued its third batch of export quotas for refined oil products for 2019 last month, while Indian domestic demand for transportation fuel takes a hit during monsoon due to heavy rainfall and floods, typically leading to higher exports from the country.

The gasoil arbitrage window to Europe, which is workable when the Gasoil EFS is around -$15-18 / MT was shut at the moment, and limited scope for arbitrage opportunities would further weigh on the Asian gasoil market.

ARA Gasoil inventories  dropped by 37 KT to 2.91 million tonnes in the week to Aug. 15.

Jet fuel cash differentials were at a discount of 2 cents a barrel to Singapore quotes on Friday, compared with a 7-cent discount on Thursday.

The September crack for 500 ppm Gasoil has dropped to $ 16.30 /bbl with the 10 ppm crack at $ 17.00 / bbl. The regrade is at  + $ 0.15 /bbl 

Click Here for a graphical depiction of Global Distillate stocks by region.

Fuel Oil

The front-month 380-cst HSFO barge crack crude narrowed its discount to Brent for a second session straight on Friday but still ended the week sharply lower.

The Sept 380-cst barge crack was at minus $16.66 a barrel against Brent, down from minus $17.14 a barrel on Thursday. At the start of the week, the front-month crack was at minus $15.51 a barrel. The firmer crack value came despite higher crude prices which rose more than 2% on Friday, recovering from two days of declines.

Easing supply shortages and expectations of a falling demand for high sulphur marine fuels in the fourth quarter of the year ahead of new shipping fuel rules take effect have seen the fuel oil market retreat sharply from record highs in July.

ARA fuel oil stocks fell by 116 KT to 1.06 million tonnes.

The September 180 cst crack is higher at – 7.80  / bbl with the visco spread at  $ 1.95 /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.

Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity

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