Crude Oil
Oil prices fell on Monday as markets absorbed the impact of the increase in production by OPEC. Brent crude fell 82 cents to settle at $74.73 a barrel. WTI settled 50 cents lower at $68.08 a barrel.
Libya has handed control of oil ports in the east to a state unit in Benghazi, which rivals the internationally-recognised NOC based in Tripoli.General Ahmed al-Mesmari said, “all oil facilities, all oil ports – not just the one in the oil crescent but even Hariga port – all oil sectors, oil pipelines, all facilities will be handed over to the National Oil Corp. in Benghazi”. The move increases the risk that Libyan oil output will be shut in as the NOC in Tripoli is the only legal entity with the right to sell oil.
ADNOC agreed to pick up Aramco’s 25% stake in a proposed $44 billion refinery and petchem complex at Ratnagiri. The complex is expected to start production by 2022 and will receive crude from Aramco and ADNOC.
Naphtha
The fundamental supply/demand outlook for Asian naphtha remained weak on Monday because more supplies are expected to arrive next month from the West, including Europe and the Mediterranean. The weaker market conditions made it favorable for buyers to seek cargoes through long term contracts. Premiums have been falling every week in June with current levels at around $ 5 / MT above Japan quotes.
The July crack is lower at -$ 2.10 / bbl
Gasoline
Asia’s gasoline crack was at a one-week high of $4.75 a barrel but the current average for June at close to $6 a barrel to Brent crude is lower versus January’s average of $7.73.
China’s gasoline exports in May 134 percent from a year earlier to 1.47 million tonnes, and up from 1.21 million tonnes in April..
The July crack is lower at $ 7.90 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asian diesel differential slipped to a more than three-month low on Monday, as refineries returning from maintenance added to supply and as the monsoon season in South Asia dented demand.
Chinese refineries have been stepping up exports of diesel on the back of higher run rates as they return from maintenance season. China has also started its annual fishing ban that is scheduled to run until mid-July to protect fish stocks, which is expected to dampen demand for diesel from fishing boats.
With arbitrage from Asia to Latin America not profitable currently, Chinese refiners have also been re-focusing on selling diesel within the region, in turn depressing differentials. Latin America is pulling diesel barrels from the United States’ Gulf Coast instead.
India has also been stepping up exports of diesel in the spot market due to weaker demand in the domestic sector due to monsoon season..
The July crack is lower at $ 12.90 / bbl with the 10 ppm crack at $ 13.75 /bbl. The regrade is lower at $ 0.90 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 180-cst fuel oil crack hovered around a discount of $5 to crude oil on Monday, easing from the previous session’s discount of $4.95 as firm oil prices started to bite. But the fuel oil crack’s average discount of about $5.70 between June 1 and 25 reflects an improvement from May’s average discount of $7.10, as persistent demand for power in the Middle East could have given the residue fuel some support.
The July 180 cst crack is steady at -$ 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. Yesterday, fuel oil cracks have become still stronger and our 3Q19 target of better than -$2.50 is nearly there. We shall look to hedge today if cracks become still stronger.
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.