The fall in crude oil prices continues unabated as investors remain skeptical of the efforts by OPEC and its allies to rebalance supply and demand in the market in the wake of rising global output. Both Brent and WTI settled at seven-month lows on Tuesday with Brent falling by 89 cents to settle at $46.02 /bbl and WTI falling by 69 cents to settle at $43.51 /bbl.
The market appears unimpressed by OPEC’s 108% compliance in May with the production cuts and is instead focusing on rising outputs from Nigeria and Libya, both of which are exempt from any cuts. Libya is currently producing 902,000 barrels a day which is the North African country’s highest output in four years. Exports of Nigeria’s benchmark Bonny Light crude oil are also set to reach 226,000 bpd in August, up from 164,000 bpd in July.
The weekly US oil inventory data released by API yesterday failed to stem the fall in prices as the drawdown of 2.7 million bbls in crude was offset by a build of 0.3 million bbls in gasoline and a build of 1.8 million bbls in distillates. Consequently, Brent and WTI are trading lower this morning by 11 cents and 7 cents respectively.
The physical market remain active with more cargoes being offered. India’s MRPL was heard offering 35,000 tonnes of naphtha for July 21-23 loading from New Mangalore on a free-on-board (FOB) basis. MRPL last week had sold 35,000 tonnes of naphtha for loading on July 14-16. Although traders are expecting the market to be well supplied in the coming months, the cracks for now are getting stronger.
The July crack has improved to -$0.15 /bbl
The Gasoline market is weighed down by concerns of weak demand and ample stocks in the United States. The continuous buildup in US inventory in only worsening the problem. On the Platts window, a total of 400,000 barrels of gasoline was traded on Tuesday, the most in at least a month.
The July crack is slightly lower at $ 9.70 /bbl
The Distillate cracks are expected to ease over the coming weeks as demand from China is expected to fall as an annual fishing ban starts and as the beginning of monsoon rains dents demand from India. A fishing ban in the South China sea which takes place between May and September will reduce gasoil demand from fishing boats.
The July crack is unchanged at $ 11.10 /bbl with the July regrade better at -$ 0.30/bbl
The Fuel Oil cracks continue to strengthen on the back of firm bunker fuel demand coupled with rising demand for power generation during the summer months. On the supply side, extension of OPEC-led cuts has reduced supplies of fuel oil rich medium and heavy crude oil and also the ongoing investment into upgrading capacity in India and Russia has led to reduced fuel oil production.
The The July crack is stronger at $0.05 /bbl with the visco spread at -$1.05/bbl
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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.