Crude Oil
Oil Prices managed to hold their own on Thursday in the face of distinctly bearish data coming out of the EIA. Brent crude oil futures fell 5 cents to settle at $61.09 a barrel. WTI futures, on the other hand, rose 51 cents to settle at $ 53.13 a barrel.
Prices drew support from the threat of US sanctions on Venezuela and Iran which would squeeze supplies.
Persistent concerns about the U.S China trade war as well as slower world growth forecasts have kept investors wary.
Data from the DOE corroborated the huge rises in both crude and gasoline stocks, but distillate stocks drew marginally albeit a little more than marginally.
Crude stocks are now not only significantly higher than last year’s levels they are also well above the 5 year average for crude stocks. The crude build is primarily attributable to a large increase in net imports as can be seen from our material balance statement below. Run cuts, as refineries prepare for seasonal turn arounds also helped increase crude stocks.
Gasoline stocks remain at seasonal highs notwithstanding an impressive growth in demand. Indeed, the material balance suggests a smaller build that what has been reported. The increase in diesel demand to 4.6 million barrels / day is also suggesting a larger draw than expected.
Naphtha
Asia’s naphtha crack hit a fresh eight week low of $26.35 a tonne on Thursday despite steady demand this week, dragged lower by weak gasoline fundamentals.
India’s net exports for 2018 at 5.75 million tonnes was also lower when compared to 6.75 million tonnes in 2017.
The February crack has has recovered to -$ 6.60 /bbl.
Gasoline
The gasoline crack discount to Brent crude widened by 45 cents to $2.12 a barrel, making this the lowest in more than seven years.
Singapore’s onshore light distillates stocks, rose 2.7 percent to reach a three week high of 15.8 million barrels in the week to Jan. 23, data from Enterprise Singapore showed. The new data also showed that stocks of light distillates were just 1.78 percent below the record high levels of 16.1 million barrels on Jan. 2.
In India, refiners exported 1.05 million tonnes of gasoline in December, making that the lowest monthly exports in four months, government data showed. This brought India’s total 2018 gasoline exports to 13.15 million tonnes, down 8.3 percent from 14.34 million tonnes in 2017.
But the losses in India’s exports were more than compensated by Chinese exports which reflected a 22 percent increase in 2018 versus 2017.
The February crack has improved to -$ 0.65 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil narrowed their discounts to 43 cents a barrel to Singapore quotes on Thursday, compared with a discount of 45 cents a day earlier.
Singapore onshore middle distillates stocks fell by 228,000 barrels in the week to Jan. 23 after hitting a 16 month high last week, data from Enterprise Singapore showed on Thursday.
The gasoil market is taking a beating at the moment due to abundant availability of barrels in the region, while the front month spread remains in contango. The February/March time spread for 10ppm gasoil widened to a discount of 60 cents a barrel on Thursday, from 52 cents on Wednesday.
Exports from India and China are bringing additional cargoes to the region, already grappling with supplies. China’s diesel exports in December stood at 1.57 million tonnes, up from 1.23 million tonnes in November, customs data showed on Wednesday. China’s gasoline and diesel exports last year both hit record as state refiners won more quotas to ship surplus fuel, with diesel exports climbing 7.8 percent to 18.53 million tonnes for the whole of 2018.
India’s diesel exports for December, however, dipped 1.7 percent to 2.27 million tonnes compared with November, and about 22 percent lower than exports in December 2017, according to government data released late Wednesday. The drop in diesel exports from India is partly due to higher domestic consumption in December, which had risen 6.5 percent to 7.37 million tonnes from the previous month.
Cash differentials for jet fuel dropped to a fresh low in over nine years on Thursday to be at a discount of $1.65 a barrel to Singapore quotes, as against a $1.61 discount on a day earlier. The current levels of jet fuel cash differentials were last seen in October 2009.
The February crack has dropped to $ 13.15 /bbl with the 10 ppm crack at $14.10 /bbl. The regrade is lower at $ 0.75 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front month viscosity spread, the price differential between front month 180 cst and 380 cst high sulphur fuel oil (HSFO) swaps, extended gains on Thursday, widening its premium further after hitting a record low on Monday. But further upside is seen limited in the near term by ample supplies of low viscosity residual fuels and sluggish demand from utilities, as well as tightening supplies of high viscosity fuel oils.
The viscosity spread for February rose to $2 a tonne on Thursday, from $1.75 a tonne in the previous session. The viscosity spread on Monday sank to a record low of $1 per tonne.
Weak regional demand and ample supplies of low viscosity, low density residual fuels have channelled steady supplies, including light cycle oil and vacuum gasoil, to the Singapore hub, weighing on prices of the lower viscosity 180 cst HSFO.
Singapore fuel oil inventories rose 7.7 percent in the week to Jan. 23 to 19.8 million barrels, snapping four straight weeks of inventory declines, official data released on Thursday showed.
The February 180 cst crack has dropped to $ 0.25 / bbl with the visco spread at $ 0.35 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Fuel Oil Cracks have eased a bit. While we expect them to ease further, we will continue monitoring them and hedge at higher levels
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.