U.S. oil futures surged nearly 2 percent on Wednesday as they were bolstered by a fifth weekly crude inventory drawdown and strong domestic gasoline demand amid ongoing global supply concerns over U.S. sanctions on Iran that come into force in November. While Brent crude futures rose 37 cents to settle at $79.40 a barrel, WTI crude futures rose $ 1.21 cents to settle at $71.12 a barrel. The WTI future expires today, so this rise could be expiry related.
The United States is seeking to negotiate a treaty with Iran to include Tehran’s ballistic missile program and its regional behavior, the U.S. special envoy for Iran said on Wednesday ahead of U.N. meetings in New York next week. He said Iranian leaders were not interested in talking despite statements by President Donald Trump and Secretary of State Mike Pompeo that they would be willing to meet with officials.
Unlike the API, the DOE reported a draw of 2.1 million barrels. This was still lower than market expectations. The DOE reported a stronger draw in gasoline and a smaller build in distillates than the API making this a more bullish report than expected.
The product draw could be due to mandatory evacuations ahead of Hurricane Florence leading to shut down of refineries.
The draw in crude appears to be bit unexpected as the increase in production and imports more or less offsets the increase in exports. Given this, the drop in consumption of crude should have created a build as per the material balance statement below.
The build in distillates too, is a bit puzzling as the massive increase in demand does not seem to have been met by the net imports given that the production of distillates has dropped. The export of Distillates reported dropped due to unfavorable economics. The draw in gasoline also appears to be understated. However, gasoline stocks remain at their highest level for this time of the year.
Click Here for detailed charts on the US DOE data
Asia’s naphtha crack eased 3 percent to a two-session low of $96.30 a tonne on Wednesday amid plentiful supplies.
The bearishness could last at least another month as there are no signs the abundant supplies will ease, especially with reduced demand from petrochemical units that have shut for planned maintenance.
The October crack has dropped to -$ 0.15 /bbl
Asia’s gasoline crack eased 0.8 percent to a sixth-session low of $8.49 a barrel, weighed down by high oil prices. China’s gasoline demand will peak in 2025, according to a forecast released on Tuesday by the research unit of China National Petroleum Corp.
Light distillates inventories Fujairah plummeted 784 KB from a week ago to 5.89 million barrels in the week to Sept. 17. Compared with year-ago levels, inventories were marginally higher.
The October crack has improved to $ 9.60 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash premiums for gasoil with 10 ppm sulphur content rose to their highest levels of this year on Wednesday buoyed by stronger demand, while the front-month spread widened its backwardated structure. Cash premiums for 10ppm gasoil climbed to 77 cents a barrel to Singapore quotes, a record high.The premiums were at 60 cents a barrel on Tuesday.
Meanwhile, cash discounts for jet fuel narrowed to 8 cents a barrel to Singapore quotes on Wednesday, after a stronger physical deal in the Singapore window. On Tuesday, the cash discounts were at 16 cents per barrel.
Middle distillates inventories in Fujairah rose 6,000 barrels from a week ago to 4.18 million barrels in the week to Sept. 17. Compared with year-ago levels, inventories were about 72 percent higher.
The October crack is higher at $ 15.15 / bbl with the 10 ppm crack at $ 15.95 /bbl. The regrade has dropped to -$ 0.10 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s fuel oil paper market was largely steady on Wednesday.The October 380-cst barge crack to Brent crude was trading at about minus $11.45 a barrel, slightly up from minus $11.50 a barrel in the previous session.
Fuel oil inventories at Fujairah slipped 130 KB to 7.93 million barrels. Compared with the same time last year, inventories were 27 percent lower and were below the 2018 weekly average of 8.263 million barrels.
The October 180 cst crack is marginally higher at -$ 4.75 / bbl with the visco spread at $ 1.05 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
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.
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.