As of date, we are yet to see any significant change on the ground of the impact of production cuts. While crude stockpiles have moved slightly, products, especially gasoline, have grown by a huge number even as refineries have cut runs. And it is this lack of demand that is worrisome.
Yesterday, we had alerted readers that the level of long positions taken by speculators could have a huge risk to the upside should a critical level be breached. The corollary to that statement was highlighted in the news yesterday that should such speculators change their mind, oil prices could sink like a stone!
Naphtha supplies continue to be tight as reflected by strong backwardation in Japan Naphtha prices. Another factor contributing to demand for naphtha is unavailability of LPG which is being consumed for heating.
However, high crude prices seem to have affected the Naphtha crack marginally. February is now valued at $2.05 / bbl and March at $ 1.10 / bbl.
Gasoline slipped a bit amid thin trade. The February crack is valued at $ 13.05 cents /bbl.
Middle distillates were steady with prices virtually unchanged from yesterday. February valued at $11.50 /bbl. The Regrade was valued at $ 0.40 /bbl.
The physical market was seen as firmer amid very thin trade. The February and March cracks were marginally stronger at -$ 2.10 and -$ 2.66 /bbl respectively.
This crack still hangs in the balance. Bears point to expected supplies for January hitting around 6.7 million tonnes. Bulls point to thin supplies expected in March, and a general lack of production of the product which may be leading into a structural change if one hasn’t taken place.
In our opinion, there HAS been a general reduction in availability of product which should lead to significant changes in the marginal value of the product. However, it does appear to be a bit overpriced at this level.
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.
Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity