Crude Oil
Oil prices were up slightly in heavy, seesaw trading on Friday, giving back most earlier gains after news that major producers would consider additional supply a day after U.S. President Donald Trump again blasted the cartel. Brent crude futures settled 10 cents higher at $78.80 a barrel, WTI crude futures rose 46 cents to settle at $71.26 a barrel.
Investors grappled with whether the Organization of the Petroleum Exporting Countries and non-OPEC producers will offset a shortfall from Iran once U.S. sanctions go into full force Nov. 4. Both crudes settled over $ 1/bbl below their highs.
U.S. crude rose 2.5 percent in the week and Brent posted a 0.7 percent weekly gain.
In early trade, supply worries sent Brent $1.00 higher to $80.12 per barrel. Prices retreated after a source told Reuters that OPEC and its allies were discussing the possibility of raising output by 500,000 barrels per day. Then prices rebounded as investors bet Iran’s production cuts would be too great to be fully offset. The market again reversed course, with markets citing worries U.S. crude would come under pressure in the fourth quarter as inventories build after driving season ends.
Global supply worries minimized the market impact of weekly data showing energy companies cut U.S. oil rigs for a second week in three. The count dropped by one rig to 866.
Hedge funds and other speculators cut their bullish wagers on U.S. crude futures and options to the lowest level in about one month in the week to September 18, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday. The speculator group cut its combined futures and options position in New York and London by 15,972 contracts to 342,839 during the period.
24 Sep 2018
For the third week in a row, prices attempted to break the barrier of $ 80 / barrel and failed. As a result of this action, the oscillators are begining to show serious bearish divergences on the dailies.
The weekly chart, however, shows prices resting on the bottom of a rising channel. Moreover, the shorter average on the MACD has crossed the longer from below indicating a bullish turn.
Trading Strategy
Last week we had recommended staying short / going short in the $ 78.75 – $ 79.00 area with a stop above last week’s high to target the 100 DMA of $75.50. Fresh shorts should be neutral on their positions. The repeated failure of prices to breach $ 80 convincingly would suggest staying short and still targeting the100 DMA which has now risen to $ 75.95.
Supports and Resistances
Prices closed last week at essentially the bottom of the rising channel for this week. Hence the level of $ 78.80-85 is a support resistance level. Below this level, we see $ 78.65 and then $ 78.05 as supports.
Above this level, we see $ 79.45-50, $ 80.00-10 and then $ 80.50 as resistances.
Bigger charts can be seen on our Technical Views Page
Naphtha
Asia’s naphtha crack recovered 90 cents on Friday to reach a three-session high of $97.10 a tonne after two straight sessions of losses as demand provided some respite for sellers. Sellers were still selling cargoes for first-half November at discounts but at narrower levels.
The October crack is lower at -$ 0.25 /bbl
Gasoline
Asia’s gasoline crack was at an eight-session low of $8.18 a barrel as Vietnam would be importing fewer and fewer cargoes going forward due to growing refining capacity. The country’s new and second Nghi Son oil refinery has offered its first gasoline export cargo after receiving approval from the government earlier this month to start exporting fuel products.
In Europe, light distillates inventories in ARA edged up 0.5 percent to a two-week high of 870,000 tonnes in the week to Sept. 20. The current stocks were however 6.8 percent higher versus the same period last year.
The October crack has improved to $ 9.85 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash premiums for 10ppm gasoil continued to gain on Friday, clinching a fresh high for this year amid stronger deals. Cash premiums for gasoil with 10 ppm sulphur content rose to 89 cents a barrel to Singapore quotes, from 82 cents a barrel on Thursday.
Cash discounts for jet fuel narrowed to 4 cents a barrel to Singapore quotes on Friday, from a discount of 6 cents a barrel on Thursday.
India’s diesel exports in August rose 14.5 percent to 2.84 million tonnes from July, government data showed on Thursday, after oil ministry data showed domestic diesel sales in India dropped 7 percent to 6.17 million tonnes in August from July.
Meanwhile, weekly gasoil inventories in the ARA refining hub climbed to the highest levels in six months. Gasoil inventories for the week to Sept. 20 rose to about 3 million tonnes, the highest since March 22. Refinery outages in Germany have led to stronger demand for products in the ARA hub, but low water levels along the Rhine river and high barge freight rates have limited buying. Jet fuel inventories fell 1.1 percent to 697 KT. Compared with year-ago levels, gasoil inventories were 11.6 percent higher, while jet fuel stocks were up about 16 percent.
The build in ARA gasoil stocks mirrors the upward trend in middle distillate inventories in Singapore and Fujairah Oil Industry Zone, reported this week.
China’s diesel demand will grow at its fastest in at least five years as a pick-up in diesel-intensive sectors in the world’s second-biggest economy coincides with lower output from domestic refineries. Diesel accounts for about 30 percent of China’s appetite for petroleum products and is typically used to fuel trucks, as well as mining and construction equipment. The slight pick-up in Chinese demand helped boost Asian diesel margins to their highest in more than three years earlier this month.
The Asian gasoil price spread between east and west widened to minus $6.22 a tonne on Friday from minus $5.87 on Thursday, but it was still not profitable to ship cargoes from east to west.
The October crack is slightly lower at $ 15.30 / bbl with the 10 ppm crack at $ 16.10 /bbl. The regrade has dropped to -$ 0.40 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Time spreads and cracks of 380-cst high sulphur fuel oil extended gains on Friday and ended the week higher as a tighter supply outlook provided support. The 380-cst fuel crack for October narrowed its discount to Brent crude to about minus $10.90 a barrel on Friday, up from about minus $11.20 a barrel in the previous session. The front-month crack on Monday was at a discount of $11.43 a barrel.
The firmer crack came despite higher crude prices on Friday which rose ahead of a meeting of OPEC and other large crude exporters that will focus on production increases as U.S. sanctions restrict Iranian exports. The Oct/Nov 380-cst time spread also firmed to about $4.75 a tonne on Friday. The front-month time spread was at $4.50 a tonne in the previous session and $4 a tonne at the start of the week.
Firm fuel oil demand and shrinking output amid refinery maintenance and upgrades is expected to limit arbitrage flows into Asia from October. Renewed U.S. sanctions on Iranian oil products are also contributing to lower fuel oil supplies.
Weekly fuel oil stocks in the ARA region fell by 143 KT, to a total of 1.138 million tonnes in the week ended Sept. 20.
The October 180 cst crack is higher at -$ 4.15 / bbl with the visco spread at $ 1.05 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Today, we are going to make our first recommendation for consumers of Jet Fuel. With the regrade for October pricing at -$ 0.40, historical analysis shows that this difference has settled below these levels approximately 20% of the time in the last 5 years. As such, history would favor making this hedge. This would most probably have to go in to settle. As such its success may be dependent on the gasoil crack retracing over the next few days, but as a hedging excercise, this is highly recommended.
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.