Crude Oil
A small draw down in US crude inventories helped prop oil markets spooked by the spread of the coronavirus from China. Brent crude futures fell $1.17 to settle at $62.04 a barrel. WTI crude futures fell $1.15 to settle at $55.59 a barrel.
The session low was for Brent was $61.25, the lowest since early December. WTI hit a low of $54.77, its lowest since November.
Two Chinese cities were put in lockd own on Thursday as health authorities around the world scrambled to prevent a global pandemic. China’s National Health Commission said 830 cases had been confirmed so far and 25 people had died as of Thursday, as the WHO declared it an emergency but stopped short of declaring the epidemic of international concern, with Singapore confirming its first case.
Amid recent heightened tension between the United States and Iran, the United States on Thursday imposed Iran-related sanctions on two individuals and six companies, including four firms tied to the National Iranian Oil Company.
This week, the International Energy Agency (IEA) said it expects a surplus of 1 million barrels per day in the first half of the year.
India’s refined fuel exports rose 24.2% in Dec’19 YoY to 6.46 million MT, the fastest growth since Oct’16, data from the petroleum ministry showed, as the decline in fuel consumption and other indicators, such as power demand, reflect an industrial slowdown.
Shell’s Nigerian venture on Wednesday declared force majeure on loadings of Bonny Light crude due to the shutdown of the Nembe Creek Trunk Line. The 150 KB/D Nembe Creek Trunk Line to the terminal has come under repeated attack from militants.
doe data
U.S. crude inventories fell 405 KB barrels last week, although gasoline stockpiles rose to their highest on record after 11 weeks of consecutive builds, the DOE reported.
Having said the above, the material balance statement shows that the build is gasoline is overstated while the draw in distillates is vastly understated.
Gasoline production seems to have increased gearing up for the upcoming driving season. The gasoline demand, however, appears to be insipid being the lowest since 2017 for this time of the year.
The distillate demand appears to have jumped pretty strongly to levels seen only a handful of times in 2019.
Naphtha
Asia’s naphtha crack fell for the fourth straight session on Thursday to a two-week low of $78.83 a tonne.
An extended cracker shutdown and high volumes of cargoes coming from the West countered supply loss from refinery maintenance.
Japan’s Assai Kaiser Mitsubishi Chemical Ethylene Corp will delay the restart of its 567 ktpa naphtha cracker in Mizushima to Jan. 28 from Jan. 24. The unit was shut on Jan. 14 following a glitch. This comes at a time when petrochemical makers across Asia have trimmed cracker run cuts by 5-10%, resulting in an estimated naphtha demand loss of more than 300,000 tonnes.
Additionally, there is a massive amount of naphtha arriving in January from the West, including Europe and the Mediterranean, at more than 2.3 million tonnes. Western cargoes arriving in February in Asia are seen above 1.2 million tonnes.
However, spot premiums this week have managed to hold firm at more than $20 a tonne to Japan quotes on a cost-and-freight (CIF) basis. This was due largely to heavy refinery maintenance taking place in first quarter in the Middle East and strong buying interest before markets in parts of Asia close for the Lunar New Year holiday.
Taiwan’s Formosa, South Korea’s YNCC, EPIC, SKI Energy, GSA Caltech, Lottery Chemical, LEG Chemo and Singapore’s PC were buying naphtha.
The February crack is higher at – $ 3.85 / bbl.
Gasoline
Exports of gasoline from China, the world’s biggest oil importer and second-largest consumer, hit a new record for the seventh straight year at 16.37 million tonnes in 2019, up 27% from 2018, according to data from the General Administration of Customs.
Light distillate stocks in Singapore eased by 160 KB to 12.97 million barrels, Enterprise Singapore reported yesterday.
The February crack is higher at 5.75/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10 ppm gasoil in Singapore were at a premium of 22 cents a barrel to Singapore quotes on Thursday, up from 15 cents per barrel a day earlier.
Diesel exports from China rose to a record of 21.98 million tonnes, up 15% from a year earlier. In December, shipments climbed to 1.63 million tonnes, up 4% from the same month a year earlier but down 26% from November.
Cash premiums for jet fuel were at 45 cents per barrel over Singapore quotes on Thursday, compared with 40 cents per barrel on Wednesday.
Singapore onshore middle distillate stocks rose 6.9% to a five-week high of 10.8 million barrels in the week to Jan. 22, Enterprise Singapore data showed. Overall, onshore middle distillate inventories were 12.7% lower year on year.
The February crack for 500 ppm Gasoil is higher at $ 11.80 /bbl with the 10 ppm crack at $ 12.50 / bbl. The regrade is at -$ 0.20 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month barge crack discount for 380-cst HSFO narrowed on Thursday amid tightening supplies, firm refining feedstock demand and falling crude oil prices. The front-month crack discount was narrower on Sept. 26.
Residual fuel oil inventories in Singapore rose 85 KB to a near seven-month high of 22.8 million barrels, their highest since the week to June 26, data from Enterprise Singapore showed.
Chinese oil refiners are unlikely to boost their output of cleaner marine fuels until at least the second quarter of 2020 because they will need to upgrade their facilities, even after the government granted tax waivers to boost output.
The supply lag will mean China will not be able to help relieve a regional shortage of VLSFO. While China’s ability to satisfy its own demand would ease the burden on regional suppliers, the tax changes will not help fill Asia’s supply gap anytime soon as Beijing is limiting wholesale VLSFO exports to develop the domestic bunker, or ship fueling, industry.
Pakistan has prohibited the use of open-loop scrubbers by ships in its waters, the latest country to tighten restrictions on the use of the cleaning devices. Malaysia, Singapore and Fujairah in the United Arab Emirates, all marine refueling hubs, have banned the use of open-loop scrubbers. China is also set to extend a ban on scrubber discharge to more coastal regions.
The February 180 cst crack has jumped up to -$ 9.60 / bbl with the visco spread at $ 1.20 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for today
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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.