Crude Oil
Oil shed more than 1% on Wednesday, logging a second straight day of losses after U.S. crude stockpiles unexpectedly rose and as Saudi Arabia maintained a faster-than-expected recovery of its oil production. Brent futures dropped 71 cents to settle at $62.39 a barrel, while WTI crude eased 80 cents to settle at $56.49/bbl.
Crude output from the Khurais field is now at 1.3 million barrels per day (bpd). Oil output is at about 4.9 million bpd in the Abqaiq plant, up from 3 million bpd on Monday
A rally in the dollar index, which moves inversely with oil, also weighed on crude futures as a Democratic-led chamber was launching an official presidential impeachment inquiry. Oil prices pared some losses during the session after U.S. President Donald Trump said a deal to end a nearly 15-month trade war with China could happen sooner than people think.
Saudi Energy Minister Prince Abdulaziz bin Salman and the chief executive of state oil company Aramco, Amin Nasser, have said output will be fully back online by the end of September.
DOE data
The crude build reported by the API was corroborated by the DOE today. Production once again touched the record level of 12.5 mb/d hit a few months ago. Distillates stocks dropped both due to reduction of production and increase in consumption and exports. Our material balance shows that crude build may have been overstated, but that is probably a bit of catch up over the last few weeks.
Naphtha
Asia’s naphtha crack fell for the third straight session to reach a 1-1/2 week low of $40 a tonne on Wednesday.
The inter-month time spread at $10 a tonne reflected a sharply stronger market versus two weeks ago when it was at $2 / MT.
Buyers were more active in seeking spot cargoes this week compared to two weeks ago with Hanwha Total, GS Caltex, Lotte Chemical and Formosa Petrochemical coming forward. Hanwha Total bought heavy full-range naphtha for first-half November delivery to Daesan at premiums in the high teens a tonne to Japan quotes on a C&F basis, similar to what it paid on Monday. Lotte Chemical paid a premium in the high single-digit a tonne level to Japan quotes on a C&F basis for naphtha also scheduled for first-half November delivery but to Yeosu. This was in sharp contrast to the discount of about $2 Lotte had paid on Sept. 5.
The October crack is lower at – $ 5.55 / bbl.
Gasoline
No fresh news on the gasoline markets. Gasoline stocks in Fujairah rose by 168 KB to 6.1 million barrels.
The October crack is lower at $ 7.10 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10ppm gasoil slipped to 28 cents a barrel to Singapore quotes, down from 31 cents per barrel on Tuesday.
Cash differentials for jet fuel were at a premium of 18 cents a barrel to Singapore quotes, the highest since Sept. 17. They were at a 12-cent premium on Tuesday.
The front-month time spread for jet remained in a backwardated structure and traded at a premium of 51 cents per barrel, 3 cents wider from the previous session.
Middle distillate stocks in Fujairah rose by 225 KB to 2.33 million barrels.
The October crack for 500 ppm Gasoil is lower at $ 17.35 /bbl with the 10 ppm crack at $ 18.05 / bbl. The regrade is at + $ 0.50 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s fuel oil market marked a milestone on Wednesday after S&P Global Platts reported the first physical cargo trade for low-sulphur fuel oil (LSFO) with a maximum 0.5% sulphur content in Singapore, ahead of a sulphur cap by the IMO next year.
While limited supply and scarce demand has so far kept a lid on trade liquidity for physical cargoes of the lower-sulphur fuel, trade activity in the relatively new marine fuel is expected to increase as the IMO’s deadline nears.
Meanwhile, firm buying interest for physical cargoes of the 380-cst high-sulphur fuel oil HSFO helped lift cash premiums of the fuel, snapping two straight sessions of steady declines.
Fuel Oil stocks in Fujairah dropped by 1.3 million barrels to 10.34 million barrels in the week ended 23rd September.
The October 180 cst crack has improved further to -$ 2.90 / bbl with the visco spread at $ 1.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
We would normally hedge the October FO crack at this level. However, with only 1 day left for it to go into settle, we will refrain from putting on the hedge..
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.