Oil prices rose 3 percent on Wednesday, with Brent crude futures hitting a three-week high, after a larger-than-expected draw in crude inventories and as Washington’s sanctions on Iran signaled tightening supplies. Brent crude futures rose $2.15 to settle at $74.78 a barrel. WTI futures rose $2.02 to settle at $67.86 a barrel.
The market also reacted to news that more buyers are shying away from buying Iranian crude as sanctions will take effect in November. Sinopec says it has no plans to import US or Iranian crude in 2H-2018, according to the chairman during an earnings briefing. In comparison, the company imported 110kt from Iran and 90kt from US out of a total of 7.34mt in 1H-2018.
Oil Prices also benefited from a weaker dollar as Trump expressed dissatisfaction with rate hikes.
In other news, Saudi Aramco has called off its IPO and disbanded its team of investment advisors.
The DOE reported a huge draw of 5.8 million barrels of crude stocks for the week ending 17th August. While this number has excited the bulls, our opinion is that this draw is merely due to a weekly fluctuation in net imports rather than any sign that crude stocks are going to be in short supply. For the last several weeks, crude stocks have fluctuated strongly, with the net imports being the single largest contributor to such fluctuations. Unless we see a trend of imports reducing significantly, we believe that this is the new normal range of fluctuation.
Gasoline and Gasoil stocks both built, largely due to the high run rates which were at the record rates achieved last week. This is another reason why we believe that oil supply is not a major issue at this point in time. Gasoline product demand continues to disappoint as we enter the middle of the driving season. Gasoline demand growth has been reported as close to flat for this year as the higher prices hurt discretionary consumption. The market could draw support from diesel growth which continues to be healthy as freight consumption increases.
For detailed charts on US stocks, please click here
Asia’s naphtha crack rebounded on Tuesday from a one-month low to reach a three-session high of $102.13 a tonne, but fundamentals were still weak and that was reflected in spot deals. South Korea’s Hanwha Total bought heavy full-range naphtha at a premium of about $3 a tonne to Japan quotes on a cost-and-freight (C&F) basis. This was sharply down from low double digit premiums that were reported to have been paid for similar cargoes around 2 weeks ago.
The September crack is lower at -$ 0.35 /bbl
Asia’s gasoline crack, similar to naphtha, rose to a three-session high of $9.25 a barrel after reaching a one-week low in the previous session, supported by outages. Light distillate stocks in Fujairah increased marginally by 43 kb to 4.85 million barrels.
The September crack is lower at $ 9.65 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s cash premiums for 10ppm gasoil climbed to an 11-week high on Tuesday amid firmer demand. Cash premiums for 10ppm gasoil were at 27 cents a barrel to Singapore quotes, up from 26 cents a barrel in the previous session.
Meanwhile, cash differentials for jet fuel widened to their maximum discounts in over a month on Tuesday, at 23 cents a barrel to Singapore quotes, compared with 16 cents a barrel on Monday.
Middle distillate stocks in Fujairah jumped 20% to reach 3.5 million barrels, their highest level this year.
The September crack is however lower at $ 14.90 / bbl with the 10 ppm crack at $ 15.80 /bbl. The regrade is at $ 0.05 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s fuel oil market was steady on Tuesday but expectations of higher arbitrage supplies into Singapore over the near term continued to weigh on sentiment, helping drag the front-month fuel oil crack to a more than one-month low. The September 380-cst barge crack to Brent crude slipped to minus $9.17 a barrel, its widest discount since July 10.
Fuel Oil stocks in Fujairah dropped over 10% to 9.3 million barrels.
The September180 cst crack is collapsed to -$ 3.45 / bbl with the visco spread at $ 1.30 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
The collapse of the fuel oil crack means we get to close several positions. Cal-19 Jet crack is valued at $17.90 /bbl, still just short of our target of $ 18.00 / bbl.
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.