Crude Oil
Oil prices jumped about 3 percent on Friday on signs of progress in ending the U.S. China trade war. Brent crude was up $1.52 to settle at $62.70 a barrel. WTI crude futures added $1.73 to settle at $53.80 a barrel.
The futures benchmarks posted their third straight week of gains, rising about 4 percent since the close since the previous Friday. After ending 2018 in free fall, oil is off to its best start for a year since 2001, gaining 18% since the start of January.
OPEC released a list of oil production cuts by its members and other major producers starting on Jan. 1 2019 to boost confidence in its oil supply reduction pact.
U.S. drillers cut 21 oil rigs this week, the biggest decline since February 2016. The rig count, an indicator of future production, fell to 852, the lowest since May 2018.
Fresh signals that Washington and Beijing might be nearing the end of their tariff fight also boosted markets. China offered to go on a buying spree of U.S. goods, which investors saw as an attempt to draw closer to a trade deal with Washington.
The International Energy Agency kept its estimate of oil demand growth unchanged and close to 2018 levels despite saying U.S. oil production growth, combined with a slowing global economy, would weigh on oil prices.
Naphtha
Asia’s naphtha crack was at a one week low of $41 a tonne on Friday..
The light ends fundamentals have been persistently weak due to high supplies, although spot prices for naphtha had recently improved on last month. Buyers have been paying higher prices for spot cargoes on a cost and freight basis recently. Cargoes sold for second half February to first half March delivery in Asia were mostly within single digit premiums to Japan quotes on C&F basis. This was an improvement for sellers versus the discounts they had fetched for cargoes scheduled for second half November to second half January delivery. Recent buyers of C&F cargoes for first half March delivery this week include LG Chem and Maruzen.
Japan imported 1.31 million tonnes of naphtha in December, highest monthly volume since January 2018. This also brought Japan’s naphtha imports for 2018 to a total of 13.86 million tonnes, down 2.6 percent from a total of 14.23 million tonnes in 2017, as heavier maintenance last year could have weighed on imports.
The February crack has sunk to -$ 6.40 /bbl.
Gasoline
Asia’s gasoline crack while gasoline was at a discount of 65 cents to Brent crude versus a discount of 67 cents the previous day. .
Gasoline stock levels across Asia, Europe and the U.S. remain high. Gasoline inventories at ARA had risen to 1.37 million tonnes in the week to Thursday. This was near the record high levels in late March of 2018.
The February crack has fallen to $ 0.35 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for gasoil with 10ppm sulphur content narrowed by a cent to 44 cents a barrel to Singapore quotes. Hurt by persistent weak demand, cash differentials for gasoil have remained at discounts since November, and the current high inventories across regions are still weighing on the differentials even as the market has improved slightly over the last couple of weeks.
Gasoil stocks in ARA rose this week to their highest levels in eight weeks.
Traders are examining the possibility of moving cargoes to the west. The Gasoil EFS has averaged around minus $19 per tonne this week. With freight rates having eased, the arbitrage is open below minus $ 18 / MT.
Cash differentials for jet fuel were at a discount of $1.57 a barrel to Singapore quotes, compared with $1.60 a barrel on Thursday.
The February crack has plummeted to $ 12.35 /bbl with the 10 ppm crack at $13.30 /bbl. The regrade has dropped to $ 1.00 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash premiums for 380 cst high sulphur fuel oil (HSFO) rose for a third straight session on Friday to a more than two week high amid higher deal values in the Singapore trading window.
The 380 cst fuel oil cash premiums rose to $4.02 a tonne to Singapore quotes, from $3.93 a tonne in the previous session and from $3.74 a tonne at the start of the week. This was the highest since Jan. 3.
Further near term gains in the cash premium, however, are expected to be capped by adequate supplies and steady seasonal demand. With less than a year to the implementation of the International Maritime Organization’s (IMO) emissions regulations, which limit sulphur content in marine fuels to 0.5 percent in 2020 from 3.5 percent currently, marine fuel suppliers are getting back in landed storage in preparation for the new rules.
The storage market in Asian bunker ports will likely tighten further this year.
ARA fuel oil inventories fell marginally by 66 KT to 1.43 million tonnes. Current stock levels are still a seasonal high.
The February 180 cst crack has strengthened to -$ 0.55 / bbl with the visco spread at $ 0.40 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to consider hedging to 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.