Crude Oil
Oil prices rose about $1 a barrel a barrel on Wednesday, bouncing from the lowest levels in months, after U.S. government data showed strong demand for refined fuel, but concerns remained over rising global crude supply. Brent crude futures gained 95 cents to settle at $63.48 a barrel. WTI crude futures rose $1.20 to settle at $54.63 a barrel.
U.S. energy firms cut three oil rigs in the week to Nov. 21, bringing the total down to 885. The number was released early this week as the US closes for Thanksgiving.
India’s crude oil imports in October rose to their highest level in at least more than seven years, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed on Tuesday. Crude imports in October climbed 10.5 percent from a year earlier to 21.02 million tonnes, the highest monthly import figure in PPAC data going back to April 2011. Imports rose as many refiners resumed purchases after maintenance of units.
Iraqi Deputy Oil Minister Fayadh al-Nema said on Wednesday that OPEC will work to stabilise oil markets, crude prices and supplies at its next meeting.
Saudi Aramco will sign five crude oil supply agreements with Chinese customers, it said in a statement on Wednesday, taking the volume of its 2019 China crude oil supply agreements to 1.67 million barrels per day.
Contrary to the API, the DOE reported another significant build in crude stocks. However, it reported a small draw in stocks in Cushing. While the draw in Gasoline was significant, the draw in distillate stocks was marginal.
We are unable to account for the build in crude stocks from the material balance statement given below. In the previous week, the statement indicated that the build should have been of the order of 2 million odd barrels, a far cry from 10 million build actually reported. This week too, the material balance statement suggests a draw as compared to the nearly 5 million barrel build reported. Our sense is that these figures ought to tally some day. So, the logical inference would be that either we are bound for a huge draw or figures have been grossly under reported for the past several weeks.
We have the same concern regarding distillate stocks as well where the material balance has consistently been suggesting lesser draws than are actually reported. Indeed, even this week, the statement shows a significant build. We hope that markets will not be dumped with huge stock builds in the coming months.
Naphtha
Asia’s naphtha crack fell for a second straight session on Wednesday and hit a three-session low of $27.30 a tonne, weighed down by continued concerns of ample supplies.
The December crack has dropped to -$ 5.50 /bbl
Gasoline
Gasoline prices continue to ease.
Light distillates stocks held in Fujairah slipped to a total of 9.641 million barrels in the week to Nov. 19, down by 560 KB from the week before. In the week to Nov. 20, 2017, Fujairah light distillate inventories were 4.692 million barrels.
India’s petrol exports in October totalled 1.18 million tonnes, up from the 1.17 million tonnes exported in September and the 1 million tonnes from the same time last year.
The December crack has dropped to $ 2.50 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Discounts on cash differentials for 10ppm gasoil widened to 14 cents a barrel to Singapore quotes on Wednesday. On Tuesday, they were at a discount of 9 cents a barrel.
Cash discounts for jet fuel were at 66 cents a barrel to Singapore quotes on Wednesday, compared with a discount of 40 cents a barrel on Tuesday.
The heavy discounts notwithstanding, the middle distillate cracks are still strong thanks to the shortfall of material in Europe which has increased the East – West EFS to – $27 / MT. With the arb wide open, stocks are being pulled out of the region.
Robust domestic demand in China is also keeping a check on availability of material in the East. Further, India’s diesel exports in October dropped 7.5 percent from the same month last year, and about 3 percent lower than September.
Middle distillate inventories in the Fujairah Oil Industry Zone (FOIZ) rose about 2 percent from a week ago to 3.1 million barrels in the week to Nov. 19. Compared with year-ago levels, weekly Fujairah middle distillate inventories have more than doubled.
The December crack has tanked to $ 15.15 /bbl with the 10 ppm crack at $ 16.10 /bbl. The regrade is higher at $ 2.50 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst barge fuel oil crack on Wednesday widened its discount to Brent crude away from a near 1-1/2 year high in the previous session as crude oil prices clawed back some losses. The December 380-cst barge fuel oil crack to Brent crude was trading at about minus $4.70 a barrel on Wednesday, compared with a discount of $4.30 a barrel in the previous session.
Fuel oil inventories in Fujairah jumped 999 KB to a four-week high of 7.78 million barrels in the week ended Nov. 19. Fujairah fuel oil inventories rose amid increased fuel oil imports from the Black Sea as well as residual fuel imports from the U.S. Gulf. The inventory build was in contrast to widespread expectations of growing pressures on fuel oil inventories in the Fujairah oil hub from early-November when U.S. sanctions on Iranian oil exports took effect.
The December 180 cst crack has eased to +$ 4.00 / bbl with the visco spread at $ 0.70 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The easing of distillate cracks has allowed us to close 3 positions, one of which is a long dated strip, today. While fuel oil has eased a bit, it continues to be very strong. While, as a commentator, we would like to see our hedge recommendations in the money, we recognize that they would actually represent a loss for refiners who would be leaving the bulk of their material unhedged.
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.