Crude Oil
Oil prices rose on Friday but pulled back sharply from early highs on concerns that continued spread of the novel coronavirus could stall the United States’ economic rebound.
Brent futures rose 68 cents to settle at $42.19 a barrel. WTI crude rose 91 cents to settle at $39.75 a barrel.
U.S. crude rose 8.7% this week, while Brent is up 9%.
In a further sign of market recovery, Brent on Thursday moved into backwardation for the first time since March. A premium for oil for immediate delivery usually indicates tightening supply and encourages storage to be drawn down.
Crude benchmarks followed other assets lower, pulling back from session highs after Boston Federal Reserve President Eric Rosengren said more fiscal and monetary support for the U.S. economy will likely be needed. Rosengren repeated his view that the U.S. unemployment rate will likely be “at double-digit levels” at the end of 2020. He also cautioned against reopening the economy too quickly after the end of lockdowns aimed at containing the virus. Heightening fears, Apple announced that it would re-close certain stores as the virus spread further.
The Baltic Exchange’s main sea freight index marked its biggest ever single-day percentage rise on Thursday, as capesize vessel segment rates jumped 50% on strong iron ore demand. The Baltic dry index , which tracks rates for ships ferrying dry bulk commodities and reflects rates for capesize, panamax and supramax vessels, rose 281 points, or about 22.6%, to 1,527, its highest since Dec. 10.
The U.S. oil and gas rig count, an early indicator of future output, fell to a record low for a seventh week in a row, dropping by 13 to 266 this week.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 469,604 (+3,328 DoD) yesterday, with the total number of confirmed infections at 9,038,809(+130,254 DoD). (Click here for details).
Naphtha
Asia’s naphtha crack hit a fresh 4-month high of $73.15 a tonne, supported by stronger gasoline fundamentals and recent demand from the petrochemical sector.
The July crack is lower at $0.00 / bbl.
Gasoline
Asia’s gasoline crack hit a new 3-month high of $4.52 a barrel premium to Brent on Friday, supported by a drawdown in inventories across key regions although levels remained high compared to a year earlier.
Gasoline stocks held independently at ARA eased by nearly 1.6% to a three-week low of about 1.39 million tonnes in the week to Thursday. Some of the gasoline cargoes were seen going to Singapore.
The ARA stock drawdown mirrored the trend in Singapore and the United States, where gasoline inventories were also lower versus the previous week. However, a recovery in demand for gasoline in the United States, the world’s largest market for the motor fuel, hit a plateau last week as coronavirus cases surged in some states, undercutting refiners’ efforts to ramp up low fuel production.
In Asia however, the trend of using ships to store gasoline is coming to an end as improved demand has led to these fuel waiting to be discharged after idling at sea in Singapore/Malaysia for about a month or so.
The July crack is lower at $4.60 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asian refining margins for jet fuel posted their third straight weekly gain, while cash discounts narrowed on Friday, as regional airlines resume more flights with governments increasingly relaxing coronavirus-led travel curbs.
Cash discounts for jet fuel narrowed to 70 cents a barrel to Singapore quotes on Friday, compared with a 74-cent discount on Thursday.
Cash premiums for 10-ppm gasoil dipped 7 cents to 90 a barrel to Singapore quotes on Friday.
Gasoil stocks held in ARA rose 1.5% to 2.89 million tonnes in the week to June 18, the highest since August 2019. ARA jet fuel inventories dropped 2.5% to 879 KT. Compared with a year earlier, jet fuel stocks were 4.5% higher, while gasoil inventories were up 2.8%.
The July crack for 500 ppm Gasoil is steady at $5.85 /bbl with the 10 ppm crack at $ 6.70 / bbl. The regrade is at -$ 2.15 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month crack for 0.5% VLSFO against Dubai crude slipped on Friday, posting a second consecutive weekly decline, weighed down by frail demand and firmer raw material crude prices.
The front-month VLSFO crack dropped to $6.67 per barrel against Dubai crude during Asian trade. They were at $8.31 per barrel on Thursday. The VLSFO cracks have shed 2.5% this week.
Cash discounts for Asia’s 0.5% VLSFO were at $5.51 a tonne to Singapore quotes, compared with $5.09 per tonne a day earlier.
The 380-cst HSFO barge crack for July saw discounts narrow to $5.76 a barrel to Brent, compared with $6.04 a barrel on Thursday.
Fuel oil stocks held in ARA refining and storage hub dropped 11.2% to 1.521 million tonnes in the week to June 18. Compared with year-ago levels, fuel oil inventories were up 41.6%, while gasoil inventories were up 2.8%.
The July crack for 180 cst FO is steady at – $3.05 /bbl with the visco spread at $1.30 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for 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 refinery.
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.