Crude Oil
Oil ended about 1% higher on Monday after a volatile trading session as traders focused on when Saudi Arabia would be able to restore full output. Brent futures gained 49 cents to settle at $64.77 a barrel, while WTI crude gained 55 cents to settle at $58.64/bbl.
Brent futures started the session at a high of $65.50 on a report in the Wall Street Journal that it could take Saudi Arabia months longer than its Aramco oil company anticipates to repair damage from the Sept. 14 attacks. The global benchmark, however, fell to a low of $63.53 after Reuters reported Saudi Arabia could restore production by early next week. A source briefed on the latest developments told Reuters that Saudi Arabia has restored more than 75% of crude output lost after the attacks and will return to full volumes by early next week.
Analysts projected U.S. inventories will likely remain below the five-year average in coming weeks as the country boosts exports to help fill the Saudi void.
Tension in the Middle East has escalated since the Saudi attack. The Pentagon has ordered additional U.S. troops to be deployed in the Gulf region to strengthen Saudi Arabia’s air and missile defenses. Britain believes Iran was responsible for the attack and will work with the United States and European allies on a joint response, Prime Minister Boris Johnson said. The United States and Saudi Arabia have also blamed Iran, which denies responsibility.
In a move that could cool tensions, Iran said the British-flagged tanker Stena Impero is “free to leave.” Iran seized the ship on July 19, two weeks after Britain detained an Iranian tanker off Gibraltar.
Japanese manufacturing activity shrank at the fastest pace in 7 months in Sep’19 as the Jibun Bank Flash Japan Manufacturing PMI slipped to a seasonally adjusted 48.9 from a final 49.3 keeping policymakers under pressure to step up stimulus.
Euro zone business growth has stalled this month, as the IHS Markit’s Euro Zone Composite Flash PMI sank to 50.4 in Sep’19 from 51.9 in Aug’19, its lowest reading since mid-2013
Naphtha
Asia’s naphtha cracks were at a five-session low of $44.63 a tonne in tandem with oil prices going lower.
But naphtha spot prices were at their highest since 2018 as Saudi Aramco sourced for supplies to plug its gap following attacks on two of its oil facilities on Sept. 14.
South Korea’s Hanwha Total for instance paid premiums in the high teens level a tonne to Japan quotes on a cost-and-freight basis on Monday for heavy full-range naphtha scheduled for Daesan arrival in first-half November. The last time Hanwha Total had paid premiums over $16 a tonne was in June 2018. The deal came a few days after YNCC had bought open-specification naphtha at a premium of about $10, the highest price the petrochemical maker had paid since May 2018.
The October crack is lower at – $ 5.25 / bbl.
Gasoline
Asia’s gasoline crack fell to a near two week low of $7.85 a barrel on Monday.
Although Saudi has said that it would fully restore lost oil production by the end of this month following attacks on two of its oil facilities, industry sources were not convinced that supplies of oil products would normalise in such a short time. Saudi Aramco has so far bought over 400,000 tonnes gasoline and at least 120,000 tonnes of naphtha from Europe. The kingdom’s demand for oil products has driven the Asian monthly refining margins to a two-year high this month.
The October crack is lower at $ 7.60 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10ppm gasoil edged higher by a cent to 29 cents a barrel to Singapore quotes on Monday, the highest since Aug. 30.
The gasoil market is drawing strength from expectations of upcoming demand as shippers prepare to switch to cleaner marine fuels from January.
Supplies might tighten further if Saudi Arabian exports take a hit following an attack on its facilities last week.
The October/November time spread remained in steep backwardation to trade at a premium of $1.03 per barrel on Monday, up from Friday’s 98 cents a barrel.
Cash premiums for jet fuel remained unchanged at 6 cents a barrel to Singapore quotes on Monday.
The October crack for 500 ppm Gasoil is higher at $ 17.55 /bbl with the 10 ppm crack at $ 18.25 / bbl. The regrade is at + $ 0.30 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s high-sulphur fuel oil (HSFO) derivatives market fell sharply on Monday despite a lack of significant developments in the fundamental supply-demand conditions since last week.
The prompt 380-cst HSFO backwardated structure, the East-West (EW) arbitrage spread and fuel oil cracks all traded sharply lower on Monday from their previous close amid relatively thin trade liquidity.
Notably, the 380-cst HSFO Nov/Dec time spread fell as much as $16 per tonne from its previous close to trade at $28 per tonne on Monday.
This comes after tightening HSFO supplies in the Singapore hub coupled firm demand pushed the fuel oil market in the previous week to fresh record highs.
The October 180 cst crack has once again sunk to -$ 6.45 / bbl with the visco spread at $ 1.20 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The swift collapse of the Fuel Oil cracks once again vindicate the benefits of hedging as we close out the earliest of of our recent crack positions. No fresh action for 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.