Oil prices continued to rise but enthusiasm seemed to drop after EIA data showed builds of product stocks. Brent crude futures settled 27 cents higher at $ 60.30 /bbl. WTI crude futures settled 45 cents lower at $55.68/bbl.
Brent made a session high of $61.41 /bbl while WTI touched $57.13 a barrel.
Tensions between the United States and Iran remained in focus. Iranian President Hassan Rouhani said that if Iran’s oil exports are cut to zero, international waterways would not have the same security as before, cautioning Washington against tightening pressure on Tehran. The comment coincided with a remark by Iranian Foreign Minister Mohammad Javad Zarif that Tehran might act “unpredictably” in response to U.S. policies under President Donald Trump. Uncertainty over the global economic outlook amid the U.S.-China trade war weighed on the market.
Rosneft has notified customers that future tender contracts for oil products will be denominated in euros not dollars. This move, which could come as soon as this year, is likely to be seen as an attempt to offset any potential negative impact of US sanctions on Russia.
The US Department of Energy is offering 10 million barrels of sour crude from the SPR for delivery between Oct. 1 and Nov. 30, according to a notice on Wednesday. The offer is part of a sale mandated by previous laws to raise funds to modernize the facility.
DOE data showed bigger than expected builds in U.S. fuel inventories last week. The crude stock draw is due to a increases in refinery runs and exports combined with a drop in exports.
An unusual occurrence for this time of the year seems to have been a drop in gasoline production combined with an increase in diesel production at a time when refinery runs have increased.
Our material balance statement below suggests that the crude draw may have been understated
The product builds appear to have largely been caused by a drop in product demand. This does not augur well for sustained crude oil prices.
Asia’s naphtha crack hit a three-session low of $20 a tonne on Wednesday on the back of a persistently high supply and slow demand.
Cracker maintenance in Indonesia and Taiwan has weighed on demand this month, while abundant supply of LPG (which is the alternative feedstock) this year has also eroded buying interest for naphtha.
The September crack is lower at -6.85 / bbl.
Asia’s gasoline crack was at a three-session high of $6.80 a barrel.
Indonesia’s Pertamina has awarded a tender to buy gasoline for September delivery. The volumes secured were not clear but it had initially been seeking 1.1 million barrels of spot cargoes for September delivery.
Light distillate stocks Fujairah burgeoned to a 10 week high of 8.3 million barrels in the week ended August 19.
The September crack is steady at $ 5.75 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Cash premiums for gasoil with 10ppm sulphur content were at 33 cents a barrel to Singapore quotes on Wednesday, down from Tuesday’s 44 cents a barrel.
Traders were concerned the gasoil market might lose its recent strength over the next few weeks as more supplies are expected to emerge from China and India.
The gasoil market would likely get a major boost from the shipping industry towards the end of this year as shippers gear up to comply with new regulations from the IMO to reduce the sulphur content in fuels from 2020. One way to do so is to switch to low-sulphur gasoil.
Middle distillate stocks in Fujairah fell by 594 KB to 2.26 million barrels in the week to August 19.
The September crack for 500 ppm Gasoil has dropped to $ 15.40 /bbl with the 10 ppm crack at $ 16.20 / bbl. The regrade is at + $ 0.55 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s 380-cst high-sulphur fuel oil cash differential climbed to a two-week high on firm buying interest for cargoes of the fuel in the Singapore trading window, despite limited trading liquidity.
Relatively tight supplies of finished-grade 380-cst HSFO for prompt delivery have helped boost fuel oil market premiums during the past week as suppliers seek to minimise inventories of the fuel ahead of new rules on sulphur content coming into effect from 2020.
The 380-cst cash premium climbed to $15.25 a tonne to Singapore quotes, up from $14.28 a tonne in the previous session.
Meanwhile, fuel oil inventories in the Fujairah oil hub fell 1.4 million barrels to a three-week low of 9.3 million barrels in the week to Aug. 19 following two consecutive weeks of firm inventory builds.
The September 180 cst crack is higher at – 8.10 / bbl with the visco spread at $ 1.95 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
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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.