Crude Oil
Brent crude jumped more than 3 percent on Monday to a four-year high above $80 a barrel after Saudi Arabia and Russia ruled out any immediate increase in production despite calls by U.S. President Donald Trump for action to raise global supply. Brent crude futures settled $2.40 higher at $ 81.20 a barrel. WTI crude futures rose $1.30 to settle at $72.08 a barrel.
Prices had cooled off on Friday after rumors of a further production increase of 500 kb/d, but those rumors were scotched by both Saudi Arabia as well as Russia over the weekend.
Naphtha
Asia’s naphtha crack was at a two-session low of $96.90 a tonne on Monday, weighed down by abundant supplies and high oil prices. Spot demand for naphtha in the meantime was thin as participants were away this week at the Asia Pacific Petroleum Conference (APPEC) held in Singapore.
The October crack is lower at -$ 0.60 /bbl
Gasoline
Asia’s gasoline crack, in contrast to naphtha, rose to nearly three-week high of $8.62 a barrel due to demand from China.
High domestic prices in China have resulted in at least one Chinese firm importing gasoline to cash in on the lower prices from Asian markets such as Singapore.
But overall, China remains a dominant gasoline exporter. Its August gasoline exports, at 1.26 million tonnes, were its highest monthly exports since May. China may issue an additional 3 million to 4 million tonnes of permits for refined fuel exports for 2018 to prevent state-owned refiners from having to slash throughput rates
The October crack is lower at $ 9.70 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for Jet fuel widened due to weaker bids and offers in the physical market. The discount increased to to 14 cents a barrel to Singapore quotes on Monday, compared with a discount of 4 cents a barrel on Friday. J
Asia’s cash premiums for 10ppm gasoil slipped to 82 cents a barrel to Singapore quotes, from 89 cents a barrel on Friday.
The October crack is higher at $ 15.60 / bbl with the 10 ppm crack at $ 16.40 /bbl. The regrade has dropped further to -$ 0.60 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash premiums for cargoes of Asia’s mainstay 380-cst fuel oil rose to a one-month high on Monday as expectations of tighter supplies in October continued to support the market. Premiums for 380-cst cargoes rose to $5.90 a tonne to Singapore quotes in Monday, up from $5.36 a tone in the previous session and their highest since Aug. 24.
Firm fuel oil demand and shrinking output amid refinery maintenance and upgrades is expected to limit arbitrage flows into Asia from October. Renewed U.S. sanctions on Iranian crude oil and oil products that start in November are also contributing to lower fuel oil supplies.
The October 180 cst crack is higher at -$ 4.05 / bbl with the visco spread opening out $ 1.15 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Our first Jet fuel consumer hedge is out of money as rising prices of crude and a stronger gasoil crack did not take jet up with it. If the regrade drops further to say -$ 0.80, we would recommend increasing the hedge. As we repeatedly mention, hedging is a sort of insurance against possible bad outcomes.
In the meanwhile, we close out a refiners hedge on Q4 regrade today, a trade we had undertaken over 7 months ago. We would reiterate that closure of a hedge on our site is not a recommendation to ‘book profit’ on the trade. Rather it is just a statement of vindication that the hedge was justified.
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.