Oil prices rallied on Wednesday after U.S. crude inventories fell in the most recent week, but gains were capped by worries over the economic fallout from the coronavirus pandemic
Brent crude settled $ 1.10 higher at $35.75 /bbl. WTI settled $1.53 higher at $33.49 /bbl.
Fuel demand has grown as lockdown curbs have eased worldwide, and shipping data shows the OPEC+ group is complying with its pledge to cut 9.7 million barrels per day in supply.
Russia’s oil and gas condensate production fell to 9.42 MB/D during 1-19 May’20. Gas condensate accounts for 700-800 KB/D of Russia’s combined liquids production, so output of just oil was about 8.72 MB/D, close to its OPEC+ quota of 8.5 MB/D of oil.
Physical crude markets are signalling a rapid shift from an enormous over-supply at the height of the coronavirus lockdowns in April towards an expected under-supply in 2H’20, with Dated Brent’s six-week calendar spread shrinking to a contango of less than $0.70/bbl from more than $6/bbl per barrel in the first week of Apr’20.
The volume of crude stored on oil tanker vessels is currently estimated to around 200 MB and may be close to a peak, tanker group Frontline said on Wednesday. “We are likely to see an unwind of floating storage in 2H’20,” it added.
Lingering concerns about the economic fallout from the coronavirus pandemic, especially in the United States, the world’s biggest oil consumer, limited gains.
Federal Reserve policymakers repeated a vow to do what it takes to shore up the U.S. economy, minutes from the U.S. central bank’s April 28-29 policy meeting released on Wednesday showed.
U.S. crude inventories fell by 5 million barrels last week, EIA data showed, while stocks at the Cushing, Oklahoma, delivery hub dropped by 5.6 million barrels.
The draw is largely explained by the fact that refiners increased processing even as crude production and imports fell
Production in North Dakota has already fallen more than half a million barrels per day (bpd) and has, along with cuts in Texas and elsewhere, helped support prices.
U.S. gasoline and distillate inventories rose last week as demand slipped. Gasoline demand is still only about 75% of normal demand of more 9 mbpd around this time of the year. Distillate demand, at 3.6 mbpd is around 90% of normal demand.
At a global level, the death toll from the COVID-19 virus rose to 329,294 (+4,740 DoD) yesterday, with the total number of confirmed infections at 5,082,661 (+99,724 DoD). (Click here for details).
Asia’s naphtha crack rose to a near three-week high of $31.90 a tonne as improved gasoline demand and strong buying interest from the petrochemical sector provided support.
The June crack is higher at -$2.85 / bbl.
Asia’s gasoline crack rose for the fifth straight session to reach a 12 cents premium to Brent on Wednesday, its highest level since March 13.
Asia’s gasoline crack had persisted at a discount to Brent for nearly two months before flipping to the positive territory on Tuesday.
Demand is seen gradually recovering while exports from China are seen lower this month. Gasoline exports from China could dive to multi-month lows in May’20 as refiners turn to domestic markets. FGE estimated that China’s May’20 exports could fall to around 300-350 KB/D.
The June crack is lower at $0.80 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash discounts for jet fuel were at $2.55 a barrel to Singapore quotes on Wednesday, compared with a discount of $2.25 a barrel on Tuesday.
The jet fuel market is getting some support from deep supply cuts and an uptick in domestic flights in regional markets such as China and Vietnam after governments eased in-country travel restrictions.
Meanwhile, cash discounts for 10 ppm gasoil narrowed to 84 cents per barrel to Singapore quotes, as against a discount of 95 cents on Tuesday.
Middle-distillate inventories in the Fujairah Oil Industry Zone rose 2% to 5.6 million barrels in the week to May 18. The weekly stocks have averaged 3.4 million barrels so far in 2020, compared with a weekly average of 2.4 million barrels in 2019.
The June crack for 500 ppm Gasoil has dropped to $3.35 /bbl with the 10 ppm crack at $ 5.15 / bbl. The regrade is at -$ 2.05 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Ex-wharf differentials for 0.5% VLSFO have slipped to narrow discounts this week.
Fujairah’s overall oil product inventories soared to a record high of 30.262 million barrels in the week to May 18, above the previous record of 27.859 million barrels in the week before.
The rise also came amid lower tank throughput rates which have fallen by as much as 30% since January, signalling weak fuel demand.
The June crack for 180 cst FO is lower at – $2.25 /bbl with the visco spread at $1.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
No fresh action for today.
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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.