Crude Oil
Brent crude dipped on Thursday as concerns about mounting supply returned after a brief rally earlier in the session on comments that Saudi Arabia’s exports would fall in August. Brent futures fell 32 cents, to settle at $72.58 per barrel, previously reaching a session high of $73.79. WTI settled 70 cents higher, or 1 percent, settling at $69.46. WTI had reached a session high of $70.17 earlier in the session before paring gains. .
Crude prices fell from session highs reached after Saudi Arabia’s OPEC Governor Adeeb Al-Aama statement that the kingdom expects crude exports to drop by roughly 100,000 bpd in August as it limits excess production.
News that a worker strike at Norwegian drilling rigs has ended also weighed on global oil prices.
Earlier in the trading day, the U.S. dollar hit its highest level against a basket of other currencies since July 2017, up half a percent on the day.
Naphtha
Asia’s naphtha crack eased to a two-session low of $92.88 a tonne on Thursday but the inter-month premium between first-half September and first-half October widened 25 cents to $8.50 a tonne, highest since July 13 due to demand.
The August crack, has improved to -$ 0.60 /bbl
Gasoline
Asia’s gasoline crack was at a three-session high of $5.75 a barrel as a drawdown on U.S. stocks gave the market some support.
Light distillates stocks in Singapore,hit a six-week high of 13.88 million barrels in the week to July 18. Japan’s gasoline stocks also rose 510,000 barrels to a two-week high of 9.67 million barrels in the week to July 14. Stocks in ARA have risen as well to 1.08 million tons, which is a one month high.
The August crack is nevertheless higher at $ 8.75 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for gasoil with 10ppm sulphur content were at 25 cents a barrel to Singapore quotes, compared with a discount of 23 cents on Wednesday on the back of ample supplies.
Asian cash differentials for aviation fuel were at a discount of 1 cent a barrel to Singapore quotes, compared with a discount of 3 cents on Wednesday. The differentials had flipped into discounts on Monday after trading at premiums for the whole of last week. The August-September spread for jet narrowed its contango structure on Thursday.
Middle distillate inventories in Singapore rose for a seventh straight week to a more than three-month peak. Stocks rose 1.3 percent in the week to July 18 to 9.86 million barrels. Overall, onshore middle distillate inventories were about 10 percent lower than a year ago. Stocks in ARA were also at a 3 month high of 2.27 million tons
The August crack is higher at $ 13.60 / bbl with the 10 ppm crack at $ 14.50 /bbl. The regrade is higher at $ 1.25 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front month 380-cst high-sulphur fuel oil time spread climbed to fresh highs on Thursday, lifted by few signs of easing supply constraints and limited arbitrage arrivals in August. The 380-cst time spread for August/September climbed to a premium of about $8 per tonne on Thursday, its highest since June 2015.
Western arbitrage flows into Singapore were expected to total around 3 million tonnes in August. Despite the wide front month arbitrage spread, arbitrage opportunities were limited by the steeply backwardated market structure. The August 380-cst arbitrage spread was at $22 per tonne on Thursday, up from $21 a tonne on Wednesday.
Singapore’s weekly onshore fuel oil inventories jumped 2.509 million barrels to 19.624 million barrels in the week ended July 18. The 15 percent rise in weekly fuel oil inventories pulled residual fuel stocks away from nearly four-year low hit in the previous week. Compared with a year ago, the latest onshore fuel oil inventories were 14 percent lower. Stocks in ARA rose by 156 KT to 1.36 million tons. Steep backwardation in Fuel Oil is making the arbitrage unworkable.
In the week ended July 18, Singapore weekly exports to China were absent for the first time in almost three months. Before that, Singapore exported fuel oil to China every week since at least the start of 2016.
The August 180 cst crack has jumped to -$ 0.75 / bbl with the visco spread at $ 1.40 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The August and September Fuel Oil cracks are extremely strong. There could be doubt in one’s mind as to whether to ‘stop out’ of the position or not. Nevertheless, we shall treat this as a hedging program and add 1 tranche of each to our hedge positions.
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.