Crude Oil
Oil prices plunged on Wednesday with Brent and WTI hitting levels not seen since 2003 and 2002 respectively.
Brent crude futures fell $ 3.85 to settle at $24.88 a barrel. WTI futures fell $ 6.58 to settle at $20.37 a barrel.
U.S. crude futures fell even after weekly U.S. data showed notable declines in gasoline and diesel inventories.
Saudi Arabia has ignored entreaties to act to balance the market, reiterating plans to maintain production at more than 12 million barrels per day, which would be a record. Iraq’s oil minister pleaded for an emergency meeting between members of the OPEC and non-OPEC producers to discuss immediate action to support the market. The Kremlin said that Russia would like to see the oil price higher. Saudi Arabia’s energy ministry, however, said it had directed national oil company Aramco to continue to supply crude oil at a record high 12.3 million bpd over the coming months.
Governments worldwide have been accelerating lockdowns to counter the coronavirus pandemic. In the past 10 days, schools have closed, businesses have shuttered and governments worldwide have urged residents to limit gatherings.
At a global level, the death toll from the COVID-19 virus rose to 7,981 (+817 DoD) yesterday, with the total number of confirmed infections at 198,378 (+15,828 DoD). The growth factor of new cases is current at 1.00 as of Sunday. The number of cases being discovered is rising quite fast now. (Click here for details).
EIA data
Crude stocks rose by 2 million barrels, while gasoline and distillate inventories fell by 6.2 million and 2.9 million barrels, respectively. The numbers are quite puzzling when one looks at the material balance statement
As per the statement above, crude stocks should have dropped considerably given the vast jump in the level of exports. Crude exports were at 4.38 million barrels per day, just short of the record high reported 10 weeks ago.
Gasoline stocks appear to be more or less balance, but distillate stocks should have built given the drop in demand. Going forward, we do expect gasoline consumption to drop given the impact of Covid 19
Naphtha
Asia’s naphtha and gasoline cracks both fell to fresh lows on Wednesday amid concerns of collapsing demand for refined fuels as a result of slowing economic and trade activity from the coronavirus pandemic. Naphtha cracks fell to a more than six-month low of $30.85 a tonne, reversing the previous session’s gains which had lifted it to a two-session high of $40.25 a tonne on Tuesday.
The April crack has dropped to -$3.65 / bbl.
Gasoline
Asia’s gasoline crack widened its discount to a more than 13-month low after the value turned negative for the first time in over a year on Monday. The crack value fell to a discount of $1.04 a barrel versus minus 60 cents in the previous session.
The April crack has recovered to -$2.25 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash discounts for jet fuel widened on Wednesday, hurt by muted buying interest for physical cargoes, while refining margins for the aviation fuel stooped further to hit a fresh low in over a decade as airlines continued to suspend routes due to the coronavirus.
Refining margins for jet fuel dropped for a third consecutive session at $2.12 per barrel over Dubai crude during Asian trading hours, the lowest on record as per data that goes back as far as March 2009. They were at $3.82 a barrel on Tuesday.
Cash discounts for jet fuel were at 38 cents per barrel to Singapore quotes on Wednesday, compared with a discount of 28 cents per barrel on Tuesday. The front-month time spread for the aviation fuel in Singapore widened its contango to trade at a discount of $1.28 a barrel, a level not seen since August 2015. The spread was at minus 84 cents on Tuesday.
Cash differentials for 10 ppm gasoil were at a narrow discount of 1 cent per barrel to Singapore quotes on Wednesday, as against a 2-cent premium in the previous session.
The April crack for 500 ppm Gasoil has improved to $8.20 /bbl with the 10 ppm crack at $ 8.85 / bbl. The regrade is at -$ 4.25 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 0.5% VLSFO cash differentials fell to a record low on Wednesday amid weak demand and ample supplies of the marine fuel. The VLSFO cash discount was at minus $5.76 a tonne to Singapore quotes, down from minus $5.26 a tonne in the previous session.
The April crack for 180 cst FO has improved to -$3.25 /bbl with the visco spread at $1.15 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action 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.