Crude prices rose on Friday, but declined on the week on worries that oversupply would weigh on the U.S. market while trade disputes and slowing global economic growth would dampen demand for oil.. Brent crude oil futures settled 40 cents higher at $71.83 a barrel, while U.S. crude futures rose 45 cents to $65.91 a barrel.
For the week WTI futures fell 2.5%. This is the 7th weekly loss in a row making this the worst losing streak in 3 years. Brent also posted a weekly loss of 1.3%, its 6th weekly loss in 7.
While the demand outlook continues to look bearish with signs of slowdown globally, the impact of Iran sanctions is still uncertain and is therefore propping the market.
In other news, South Korea is seeking waivers from the US to continue importing Iranian condensate, according to a ministry official. The two countries held consultations in June and July and are likely to meet again for negotiations.
Workers at Libya’s Sharara field allegedly plan to prevent a tanker from loading at the Zawiya terminal this weekend. This would shut production at the 340 kb/d Sharara field as the Zawiya refinery is down and all the tanks at the terminals are full, according to a Platts report
We have now come to a point where all three viz. Daily, Weekly and Monthly charts are showing a downtrend. In the daily charts, the 50 DMA has crossed the 100 DMA from above, which is a bearish signal. Brent has also posted its 6th losing week in 7. While the daily and weekly charts seem to be in oversold territory, the monthly chart still seems to have some potential to go lower.
The last two days showed some pullback from near the 200 DMA which is the next big technical support to breach. While prices did breach the $71.00-$71.30 area, which was showing strong technical support, they were not able to sustain it for more than a day. These, then, form the key technical supports to watch and possibly even take positions from.
While our long term view remains that prices will test $ 69, aggressive bulls may like to go long around here and possibly and possibly add more in the $ 70.50 area with a target of $ 74.50.
Traders with a bearish bias would possibly look to add to their shorts below $ 71.00 to target $ 69.00. The stop loss for existing positions may be trailed to just above $ 73.25 / bbl.
Supports and Resistances
As mentioned above, $ 71.00-30 and the 200 DMA, which is in the $ 70.25-45 area, are strong supports before our first target of $ 69.
Resistance would first come in the $72.50 area and then the $73.00-25 area. The next resistance is in the $ 74.00.
Click here for full sized charts for Brent.
Asia’s naphtha crack fell below $100 for the first time in a week, hitting $99.63 a tonne on Friday on an expected rise in supplies and weaker demand because of forthcoming cracker maintenance in Japan and South Korea.
The September crack is at $ 0.00 /bbl
Asia’s gasoline crack extended losses to reach a three-session low of $9.15 a barrel. The value hit close to an 11-month high on Wednesday at $11.55 a barrel after gasoline supply disruptions at Reliance Industries’ Jamnagar complex, also the world’s largest refining complex.
Gasoline stocks at ARA refining and storage hub dropped 12 percent in the week to Thursday to reach 901,000 tonnes, their lowest since Jan. 4.
The September crack is lower at $ 9.80 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash differentials for 10 ppm gasoil rose to their highest in over two months on Friday, buoyed by firming demand and weaker inventory levels in the region, while the front-month spread widened its backwardated structure.
Cash premiums for gasoil with 10 ppm sulphur content climbed to 25 cents a barrel to Singapore quotes, its highest since early June. The premiums were at 19 cents a barrel on Thursday. The overall diesel market in the region has been quite tight in recent weeks especially in Japan, but arbs are fairly narrow at the moment and that may act as a dampener in the short-term. The Asian gasoil price spread between east and west was at its narrowest for this week on Friday at minus $8.52 a tonne, compared with minus $9.72 a tonne in the previous session. Arbitrage is usually profitable when the EFS trades at least roughly minus $15 a tonne or below.
Cash differentials for jet fuel narrowed their discounts by a cent to 13 cents a barrel to Singapore quotes on Friday.
Gasoil stocks in ARA dropped about 3 percent in the week to Thursday. Gasoil inventories for the week to Aug. 16 fell to 2.5 million tonnes.
The September crack is higher $ 15.25 / bbl with the 10 ppm crack at $ 16.15 /bbl. The regrade is at $ 0.25 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
The front-month East-West spread for 380-cst fuel oil fell for a fourth straight session on Friday and hit its lowest in nearly two weeks, as industry participants anticipated higher arbitrage flows into Singapore. While the improved supply outlook helped dampen bullish market sentiment in the past week, concerns of contaminated bunker fuels in Singapore that emerged in July and a lack of finished grade fuel oil may still lend support in the near term.
Weekly fuel oil stocks in ARA edged up by 6,000 tonnes to a two-week high of 1.058 million tonnes in the week ended Aug. 16.
The September180 cst crack is lower at -$ 2.45 / bbl with the visco spread at $ 1.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
We close out our purchase of the Naphtha Dubai 2Q19 crack having met our target. Cal 19 distillate cracks have been rising so we shall look for our target of $ 18.00 /bbl for Jet.
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.