Crude Oil
Oil prices plunged on Thursday, losing about 5% as trade tensions dampened the demand outlook. Brent crude futures settled $ 3.23 lower at $67.76 a barrel. WTI dropped $ 3.51 to settle at $ 57.91 a barrel. The expiring June settled at $62.99 a barrel, down 11 cents.
Yesterday’s fall is biggest daily fall in six months. Prices are on course to complete the biggest weekly fall in six months as well.
Oil coursed downward with other global markets as concerns grew that the China-U.S. trade conflict was fast turning into a technology cold war between the world’s two largest economies.
While the trade war is the main cloud over economic growth and demand predictions, market participants also pointed to weakening U.S. data and overfull U.S. crude stockpiles.
Economic health indicators for the United States, Europe and Japan showed less robust growth than expected.
Data firm IHS Markit said its U.S. manufacturing PMI declined to a reading of 50.6 in early May, marking the lowest level since September 2009, from 52.6 in April.
The survey showed broad weakness, with a measure of new orders received by factories dropping for the first time since August 2009. The firm’s survey for Euro zone business growth accelerated less than expected this month. Additionally, U.S.-Iran tensions are decreasing. The oil market has built in risk premium related to U.S. sanctions on Iran, and that risk is now seen decreasing.
Asia’s oil refiners are considering reducing output after margins slumped to their lowest for the season since 2003, according to industry sources and Refinitiv data. Margins at a refinery complex in Singapore are at their lowest for this time of the year since 2003, even narrower than lows seen in 2009’s global financial crisis. In China, independent refiners known as ‘teapots’, which account for about a fifth of the country’s crude imports, operated at below 50% of capacity on average in April through May, versus 64% in the first quarter, said Zang Wengang, an analyst with Sublime Information Co.
Naphtha
Asia’s naphtha crack sank to nearly 6-1/2 month lows of $19.25 a tonne on Thursday, close to a discount of $9 a barrel to Brent crude.
This favoured buyers, with South Korea’s YNCC having picked up two cargoes for first-half July arrival at Yeosu at discounts of below $4 a tonne to Japan quotes on a cost-and-freight (C&F) basis. Not only was the discount deeper than the price YNCC paid on May 10, it was also the lowest it has paid since Dec. 3 2018. Naphtha is now the worst performing oil product, even worse off than 180-cst fuel oil, which traditionally has the weakest crack value.
The June crack is higher at – $6.85 /bbl;
Gasoline
No fresh news on the Gasoline market. Light distillate stocks in Singapore recovered marginally after 4 weeks of drops. They rose by 341 Kb to 11.50 million barrels.
The June crack is lower at 5.80 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s 10ppm gasoil cash differential to Singapore price quotes was flat on Thursday after briefly flipping to a slight premium early this week for the first time since November.
The impact of refinery woes in Europe caused by contaminated Russian oil was short-lived as high supplies in Asia weighed.
Singapore’s onshore middle distillates stocks surged to a 10-week high of 11.832 million barrels in the week to May 22, data from Enterprise Singapore showed.
Some refiners who were initially reluctant to cut runs may now be prompted to do so. Companies that planned to trim output include SK Energy, a unit of SK Innovation, the Singapore Refinery Company (SRC), owned by PetroChina and Chevron Corp and at least one refiner in Thailand.
India however bucked the trend and has been relying on imports to plug a supply gap as some of its refineries were either shut for upgrades or about to shut as the country is mandated by law to move towards cleaner fuels. In April India imported 250,000 tonnes of diesel, making that its highest monthly import volume since July 2017. India’s monthly diesel imports in 2018 were mostly negligible.
The June crack for 500 ppm Gasoil is higher at $ 14.55 /bbl with the 10 ppm crack at 15.25 / bbl. The regrade is at -$ 0.40 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst barge fuel oil crack clawed back some of the previous session’s losses on Thursday, narrowing its discount to Brent as benchmark crude oil prices fell. The June crack narrowed to minus $9.24 a barrel to Brent crude from minus $9.71 a barrel in the previous session, its lowest since Oct. 5.
Singapore fuel oil inventories were down 6%, falling by 1.305 million barrels from the previous week to 22.465 million barrels,a six-week low, in the week to May 22.
The June180 cst crack is higher at – $ 2.35 / bbl with the visco spread at $ 1.90 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to report 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 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.