Crude Oil
Markets reacted extremely positively to a statement by OPEC that it would seek to maintain 100% compliance with quotas. Brent crude rose $2.50 to settle at $75.55 a barrel. U.S. West Texas Intermediate crude for August delivery, the new front month, rose $ 3.04 to $68.58 a barrel.
Saudi Aramco made a statement that the effect of adherence to the cuts would have the effect of releasing 1 mb/d of crude to the market. The Iraqi representative however said that the real increase would be of the order of 770 kb/d as some countries were struggling to meet quota.
For the week Brent gained 2.9% whereas WTI gained 5.8%.
The number of active rigs in the US fell by 1 to 862 as per the Baker Hughes report.
In other news, US has asked Japan to completely halt Iranian oil imports.This is a harsher stance than the US previously took in 2012 when it allowed Japan to continue buying at reduced levels in exchange for waivers from US financial restrictions.
Libya says it has put out the fires at Ras Lanuf in a statement on its website. The NOC said Tanks 2 and 12 suffered “heavy damage” while tanks 5 and 6 were “saved”. Libya is estimated to have lost around 40% of its oil storage capacity due to this militant attack.
This morning though, crude has fallen in Asia with Brent trading around $ 74.00/bbl at the time of writing.
The strong recovery on Friday stopped just short of the the 50 day moving average which seems to have held as a resistance. In the meanwhile, a fresh low of $ 72.45 was made breaching the $73.00 levels. The strong gain last week does not appear to have impacted the MACD which is still continuing to show a bearish picture. The weekly chart shows the development of a falling channel.
Trade for the Week
Agressively bullish traders may choose to exit shorts. We would recommend maintaining at least some short position still seeking a target of around $ 70- 71 /bbl with a stop above the 50 dma.
Supports and resistances
Supports lie at the weekly close of $ 75.50 with further supports below at $ 74.30- 74.50 and then $ 73.00 – 73.20.
The first resistance is at the 50 dma of $ 75.83, followed by the $ 76.10-50 area and then the $ 75.50 area.
Naphtha
Asia’s naphtha crack ended the week at a two-session low of $71.20 a tonne as high oil prices and expanding supplies countered strong demand, with at least four buyers seeking cargoes at the same time..
The July crack is steady at -$ 2.00 / bbl
Gasoline
Asia’s gasoline crack was at a three-session high of $4.26 a barrel but stocks were ample.
ARA Gasoline stocks fell by 40 KT to a level of 1.06 million ton, but this is still a seasonal high.
The July crack is higher at $ 8.00 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s refining margins for 10ppm gasoil fell on Thursday to their lowest in over three months, while cash premiums slipped amid increasing supplies as middle distillate inventories in Singapore climbed to their highest in nine weeks.
Cash premiums for 10 ppm gasoil dropped to 6 cents a barrel to Singapore quotes, down from 17 cents on Thursday. Cash differentials for jet fuel widened by two cents on Friday and were at a discount of 30 cents a barrel to Singapore quotes..
ARA Gasoil stocks fell by 108 KT to 1.99 Million tons, the lowest level since December 2017.
The July crack is lower at $ 12.95 / bbl with the 10 ppm crack at $ 13.80 /bbl. The regrade is lower at $ 0.95 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 180-cst fuel oil crack strengthened for a third straight day, supported by stronger fundamentals. The 180-cst grade crack rose 18 cents to reach a discount against crude at $4.95 a tonne, making this the narrowest discount in 2-1/2 weeks.
Fuel stocks held in ARA eflected an increase 53,000 tonnes, to 1.534 million tonnes in the week to Thursday. This was the highest stockpile level since March 30, 2017 and just short of the highest level in the last seven years.
This is the reason we believe that the strength in Fuel Oil in the east is unlikely to sustain because at some price, the Arbitrage will open up.
The July 180 cst crack is steady at -$ 2.20 / bbl. The visco spread is at $ 1.70 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Due to exigent circumstances, this section may be updated with a lag of one day for this week.
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.