Oil prices continued to recover for a third day in a row but the gains were much less. Brent crude futures settled up 14 cents at $66.76 a barrel. WTI crude futures settled 22 cents higher at $56.68 a barrel.
For the week, Brent lost 4.8% while WTI lost 6.2%. Both markers posted their 6th consecutive weekly drop.
For the week ahead, the market will be watching closely the possible impact of a further cut of 1.4 million barrels from current levels as proposed by Saudi Arabia. In our opinion, it would be difficult to implement because of
- The break in momentum on the production cuts
- Iran will no longer be willing to comply with any cuts
- Nor will Russia be so willing as it has already started pumping at levels prior to the production cuts
- US product continues to surge and is up 2.1 million barrels per day from October 2016.
In the meanwhile, prospecters added 2 more rigs in the US, bringing the count to 888, the highest level since March 2015.
Brent speculators on the Intercontinental Exchange (ICE) cut net longs by 45,216 contracts to 214,832 in the week, also the lowest since June 27, 2017
19 Nov 2018
The markets seem to be still in the midst of a bear grip with prices posting their sixth weekly loss in a row. Brent has met our medium term outlook of $ 69.90. All oscillators are into oversold terrritory. Is there hope for a recovery from here?
There do appear to be mild signals suggesting a possible recovery. The RSI has already turned in the daily charts though it is still in highly oversold territory. While it is yet to turn in the weekly charts, it is in oversold territory. The RSI is neutral in the monthly chart. The weekly chart is showing a steep downward channely that would be hard to sustain over a long period of time which is another mildly bullish signal.
A cautioning factor though would be the MACD in the monthly charts which seem to be on the verge of a crossover. Such a crossover would suggest a further drop which could land us below $ 60 /bbl.
Supports and Resistances
The first support lies in the $ 66.40 area. The next support is seen at $ 65.50 and then $ 64.45, the low of last week.
The first resistance is around the $ $67.80 area followed by the $ 69.00 area and then around $ 70.00 area.
Asia’s naphtha crack for first-half January rose to $35.90 a tonne on Friday, highest front-month value since Nov. 7, as demand persisted for the fourth day this week. South Korea’s LG Chem came forward to buy naphtha for second-half December delivery. This week alone, including LG Chem, South Korea, Japan and Taiwan have bought a total of more than 200,000 tonnes of naphtha for second-half December delivery.
The December crack has jumped up to -$ 4.75 /bbl
Asia’s gasoline crack fell for the second day to a three-session low of 22 cents a barrel due to ample supplies. Notwithstanding that, Chinese exports are expected to stay high.
China’s state oil firms had earlier requested additional quotas to export fuel in a move to prevent having to cut their refinery throughput in the fourth quarter.
Gasoline held independently at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub, for instance, fell to an eight-week low of nearly 900
Gasoline stocks in ARA fell to an eight-week low of nearly 900 KT.
The December crack has improved to 2.55 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash premiums for 10ppm gasoil slipped to 3 cents a barrel to Singapore quotes, hurt by weaker buying interests in the physical market on Friday. The benchmark gasoil cash differentials were at 10 cents a barrel on Thursday.
Availability of gasoil seems to be improving as refineries return from turn around. However, the East-West Gasoil EFS, was around minus $22 a tonne on Friday which still allowed scope to move cargoes to the west even as the stock situation appears to be improving in Asia,
Cash premiums for jet fuel were at a discount of 19 cents a barrel to Singapore quotes on Friday, compared with 18 cents a barrel a day earlier.
The physical jet fuel market in the Singapore window remained muted with no bids or trades on Friday.
Gasoil stocks in ARA fell by 133 KT to 2.38 Million tonnes. This is a 5 month low. Stocks, however, are still 300 KT higher than last year.
The December crack is at $ 16.60 /bbl with the 10 ppm crack at $ 17.50 /bbl. The regrade is at $ 1.60 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
A tighter supply outlook for December compared with November helped lift the 380-cst fuel oil front-month time spread and East-West arbitrage spread on Friday. The 380-cst December/January time spread jumped to about $11.25 a tonne from about $10.50 a tonne on Thursday.
Similarly, the December East-West 380-cst fuel oil arbitrage spread climbed to about $39.75 from $38.50. The front-month arbitrage spread rose to $40 per tonne on Nov. 8, its highest since records began in late 2015.
Heavy distillate stocks in ARA fell by 345 KT to 913 KT which is the lowest since March 2018. The drop is attributed to stocks being moved Singapore.
The December 180 cst crack is higher at +$ 3.00 / bbl with the visco spread at $ 0.80 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Prompt Gasoil cracks continue to ease allowing us to close one more recent position today. Fuel Oil still stays strong and along with it, Gasoil cracks at the back end of 2019 are lifting the whole strip. We would be looking at 10ppm Gasoil cracks at higher than $ 21/bbl for 4Q2019 as also Jet cracks beyond $ 22/bbl.
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.