Crude Oil
Oil prices tumbled more than 5 percent on Tuesday in heavy trade due to fears of oversupply and deteriorating demand. Brent crude oil fell $3.35 cents to settle at $56.26 per barrel. U.S. crude dropped $3.64 to end the session at $46.24 a barrel.
Both markers hit multi month lows during the session. The drop came in the face of very heavy volumes underscoring the strength of the sentiment. More than 900,000 contracts changed hands on Tuesday, far exceeding the 200-day moving average of 591,000 contracts. Investor confidence is deteriorating, with more fund managers expecting global growth to weaken over the next 12 months, the worst outlook in a decade.
U.S. crude stocks rose by 3.5 million barrels in the week to Dec. 14 to 441.3 million, API said, compared with analysts’ expectations for a decrease of 2.4 million barrels. If that build is confirmed by U.S. government data Wednesday, it will be the first increase in three weeks.
To add to the bearish factors,
- Britain’s largest oilfield Buzzard, restarted after repairs on pipe work adding to supply
- The U.S. government said output from shale would top 8 million barrels per day (bpd) this year and data suggested U.S. crude inventories would rise this week.
Separately, Libya’s state oil firm declared force majeure on operations at the country’s largest oilfield, El Sharara. The 315,000 bpd field, located in the southern part of the country, was taken over on Dec. 8 by groups of tribesmen, armed protesters and state guards demanding salary payments and development funds.
API Data
The build in API stocks caught the market by surprise. However, the API and the DOE have been at odds over stock movements for the past few weeks and it will take a while before they return to sync. While the gasoline build is expected for this time of the year, the draw in distillate stocks has portents of bullishness for distillate cracks.
Naphtha
Asia’s naphtha crack edged up 5 cents to reach a two-session high of $49.48 a tonne on Tuesday as oil prices fell. Fundamentals were slightly better than two weeks ago as some of the recent surplus was absorbed by spot demand for cargoes delivering in January.
The January crack is higher at -$ 2.75 /bbl
Gasoline
Asia’s gasoline crack discounts narrowed to 57 cents a barrel from 76 cents a barrel the previous day. But supplies remained heavy across regions.
The January crack is higher at $ 2.30 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10ppm gasoil were at 65 cents a barrel to Singapore quotes, compared with a 55 cent discount per barrel on Monday.
The front-month time spread for 10ppm gasoil remained in a contango and was at a discount of 66 cents a barrel.
Cash differentials for jet fuel narrowed to $1 a barrel discount to Singapore quotes, as against a discount of $1.11 a barrel on Monday, the widest since September 2015.
The January crack is higher at $ 13.25 /bbl with the 10 ppm crack at $ 14.25 /bbl. The regrade is lowere at $ 2.35 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 180-cst fuel oil crack extended losses on Tuesday, widening the discount to more than $2 a barrel, its cheapest in more than two months as ample supplies weighed.
China’s November fuel oil output fell 13.8 pct year-on-year to 1.85 mln tonnes.
The January 180 cst crack is lower -$ 2.25 / bbl with the visco spread at $ 0.35 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
We have closed out all but one of our Fuel Oil positions in 2019. We now need to only look at the regrade in a big way since that is still running strong.
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.