Crude Oil
Oil futures rose more than 1 percent on Tuesday on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled an informal target near current levels. Brent crude futures rose 98 cents to settle at $79.03 a barrel, while WTI crude futures fell 94 cents to settle at $69.85 a barrel.
Bloomberg reported on Tuesday, citing unnamed Saudi sources, that the kingdom was currently comfortable with prices above $80 per barrel, at least for the short term. Bloomberg reported that while Saudi Arabia had no desire to push prices higher than $80, it may no longer be possible to avoid it.
Russian Energy Minister Alexander Novak said an oil price between $70 and $80 was temporary and sanctions-driven, adding the long-term price would stand around $50 a barrel. U.S. Energy Secretary Rick Perry said last week in Moscow that he did not foresee any price spikes once sanctions came into effect, and was positive about Saudi output.
The longer-term outlook remains weighed down, however, by an escalation in the China-U.S. trade war that has clouded the outlook for crude demand. China, one of the world’s largest oil consumers, on Tuesday added $60 billion of U.S. products to its import tariff list. The move was in retaliation to President Donald Trump’s planned levies on $200 billion worth of Chinese goods. On Monday, the Trump administration said it would begin to levy new tariffs of 10 percent on about $200 billion of Chinese products next Monday, with the tariffs to go up to 25 percent by the end of 2018.
API Data
The API reported a small build of 1.25 million barrels against a consensus expectation of a draw of 2.7 million barrels. While it also reported a draw in gasoline stocks, which was more than expected, there was a sizable build in distillate stocks which may not be bullish for prices.
Naphtha
Asia’s naphtha prices remained under pressure due to a stubborn glut. South Korea’s Hanwha Total paid a discount of $1 a tonne to Japan quotes on a cost-and-freight (C&F) basis for naphtha scheduled for first-half November, making this the first discount it has paid since July 2017. The current market was in stark contrast with when Hanwha Total was paying $17 a tonne premium in May for heavy full-range naphtha.
The bearishness could last at least another month as there are no signs the abundant supplies will ease, especially with reduced demand from petrochemical units that have shut for planned maintenance.
The October crack is however higher at $ 0.25 /bbl
Gasoline
Asia’s gasoline crack was at unchanged from the previous session’s $8.56 a barrel. Several cargoes of finished-grade gasoline have left the Middle East to the U.S. East Coast in the past week, a relatively rare move.
The October crack has improved to $ 9.45 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s refining margins for 10ppm gasoil slipped to their weakest in more than five weeks on Tuesday, while cash premiums for the industrial fuel rose on stronger bids in the physical market. Cash premiums for 10ppm gasoil climbed to 60 cents a barrel to Singapore quotes on Tuesday, compared with 53 cents a barrel on Monday.
Meanwhile, cash discounts for jet fuel narrowed to 16 cents a barrel to Singapore quotes on Tuesday, compared with a discount of 27 cents a day earlier.
China’s diesel demand has peaked and gasoline will peak in 2025, while natural gas demand will increase over the next two decades to feed a massive gasification campaign, according to a forecast released on Tuesday by a research arm of a state energy group. Demand for diesel is waning amid moderating economic growth and tighter environmental scrutiny, while gasoline demand is capped by slowing growth in private car sales and the rise of electric and natural gas-fuelled vehicles. This would be a blow to China’s oil refineries, as diesel is a main contributor to its fuel sales revenue. As additions to China’s refining capacity outpace the nation’s fuel demand growth, more than 50 million tonnes of surplus fuel is forecast for 2050.
The October crack is higher at $ 15.00 / bbl with the 10 ppm crack at $ 15.80 /bbl. The regrade is higher at $ 0.20 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst barge crack discount to Brent crude fell on Tuesday following an abrupt jump in crude oil prices. The October 380-cst barge crack to Brent crude was trading at about minus $11.50 a barrel, down from a settlement of minus $11.35 on Monday.
The October 180 cst crack is lower at -$ 4.80 / bbl with the visco spread widening to $ 1.05 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to report 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.
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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.