Crude Oil
Oil prices were virtually unchanged notwithstanding escalating tensions between the US and China and a large crude stock build in the US.
Brent crude 3 cents lower at $44.29 per barrel, while WTI fell 6 cents to $41.90 a barrel.
The US gave China 72 hours to close its consulate in Houston amid accusations of spying, marking a dramatic deterioration in relations between the world’s two biggest economies.
Adding to pressure were signs that Iraq, the second-largest producer in the OPEC was still not meeting its target to cut supplies.
President Donald Trump said on Tuesday that the outbreak would probably worsen before it got better, a shift from his previously robust emphasis on reopening the economy.
South Korea plunged into recession in Q2’20 with its economy shrinking 3.3% QoQ, its worst decline in more than two decades as the coronavirus pandemic battered exports and social distancing curbs paralysed factory output.
Russia is considering hedging some oil and gas revenues by using funds from the National Welfare Fund to buy put options, Interfax reported 22 Jul’20. The mechanism would be similar to one currently used by Mexico.
doe data
Crude inventories rose by 4.9 million barrels in the week to July 17 to 536.6 million barrels. Production rose to 11.1 million barrels per day.
Demand for US gasoline which was expected to rise in summer with a renewed appreciation for road trips as travelers avoid airplanes has so far not materialized. US gasoline product supplied fell 1% to 8.55 MB/D according to the latest EIA data. The build in distillates has largely been caused by a drop in demand.
Our material balance shows a build for gasoline as against a reported draw. However, the crude build expected by the same is much lower than that reported.
covid 19
At a global level, the death toll from the COVID-19 virus rose to 629,323 (+7,113 DoD) yesterday, with the total number of confirmed infections at 15,365,326 (+279,769 DoD). This is a fresh record for the number of daily growths (Click here for details).
Naphtha
Asia’s naphtha crack eased to a two-session low of $71.65 a tonne, but this was more than double the value from a year earlier despite the market being in the middle of the COVID-19 pandemic.
Supplies were not as ample as last year following refinery run cuts as refiners coped with the coronavirus outbreak.
But plastics demand has been firm most of this year, prompting naphtha crackers, which had previously cut runs in first quarter, to ramp up and run high.
The August crack is higher at -$ 0.05 /bbl
Gasoline
Asia’s gasoline premium to Brent crude rose to a two-session high of $1.12 a barrel on Wednesday, mirroring the trend in Northwest Europe where demand was slowly picking up after lockdowns were gradually eased.
The August crack is lower at $2.20 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for 10 ppm gasoil fell on Wednesday, hurt by weaker buying interest for physical cargoes, while the front-month spread for the industrial fuel narrowed its backwardated structure.
Cash premiums for 10 ppm gasoil were at 62 cents a barrel to Singapore quotes, down from a 70-cent premium a day earlier.
The August/September time spread for 10 ppm gasoil in Singapore traded at a premium of 11 cents a barrel on Wednesday, compared with 13 cents in the previous session. The gasoil EFS was around minus $10 per tonne on Wednesday.
The August crack for 500 ppm Gasoil is lower at $6.20 /bbl with the 10 ppm crack at $ 7.00 / bbl. The regrade is at -$ 4.10 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 0.5% VLSFO market extended gains on Wednesday.
The VLSFO cash differential rose to 23 cent per tonne premium to Singapore VLSFO quotes, up from a discount of 92 cents per tonne in the previous session and touching its highest since July 7.
Western arbitrage arrivals in August were assessed at 1.05 million tonnes so far, down from an average of 2-2.5 million tonnes per month in the first half of the year. VLSFO cash premiums rose to a four-month high of 84 cents per tonne to Singapore quotes.
Similarly, for the first time since January, the front-month time spread flipped to backwardation at 25 cents per tonne, while the front-month crack against Dubai crude was at its highest since late-April at $8.86 a barrel.
The August crack for 180 cst FO is lower at – $3.95 /bbl with the visco spread at $0.60 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action 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.