Crude Oil prices had a fairly volatile day yesterday before ending marginally higher. Brent settled 29 cents higher at $45.83 / bbl while WTI settled 37 cents higher at $ 43.38/bbl
Brent prices rose sharply in early morning trade in Japan making a high of $ 46.40 /bbl. and then slowly lost steam during the London and European trading day. As New York opened, Brent prices plunged to make a low of $45.20 / bbl. before strong support kicked in and pulled prices up back past $ 46.00 /bbl. However, this was not sustainable and prices then retraced back to the closing level.
Funds have extended short positions to record levels with positions in the US reaching nearly 190 million barrels and positions in Brent reaching 169 million barrels according to Reuters.
View on Gasoline
This is in continuation of our post last week where we had mentioned about inventories being at their highest for this time of the year and drawdowns being much lower than anticipated.
It is the summer season in the US, a time when gasoline demand typically peaks in the world’s biggest oil consuming country as motorists drive out for their vacations. Consequently, this puts strain on the available refining capacity and the pipelines and leads to significant drawdown in inventories.
However, this year we are witnessing a scenario wherein demand to transport gasoline to the country’s populous northeast is the weakest in six years. This clearly hints at a supply glut wherein even the current months of peak demand are unable to balance the demand supply equation.
The Colonial Pipeline Co has reported that this year, so much fuel is stored in tanks in the Northeast that demand from refiners and fuel traders to bring gasoline through its pipeline to the region from refining hubs in the South was the lowest in six years. In fact, for the first time since 2011, the pipeline was operating below capacity. This is in sharp contrast to previous years wherein refiners and traders have had to supplement deliveries with tanker shipments or even imports during this peak driving season.
The Colonial Pipeline connects Gulf Coast refineries with markets across the southern and eastern United States through more than 5,500 mi of pipelines, delivering gasoline, diesel, jet fuel and other refined products.
Linespace, a spot market created to trade capacity on the congested pipeline, turns negative when it becomes unprofitable to ship barrels from the Gulf Coast to the East Coast. Accordingly to S&P Global Platts, Linespace for the Pipeline has only been positive for six days so far this year. This only adds to the bearish outlook on prices.
Given the above scenario, we may not see a big change in demand-supply balance even as we approach the fourth of July (US Independence Day), when gasoline demand is usually at its peak.
Cracks this morning
No commentaries on Products today as Singapore markets were closed for Hari Raya Holiday on 26.06.2017. Cracks in general are marginally lower than Friday’s levels.
July Naphtha-Dubai: -$0.60 /bbl
July 92R Gasoline-Dubai: $9.90 /bbl
July 0.05% Gasoil-Dubai: $10.60 /bbl
Regrade: -$0.25 /bbl
July 180Fuel Oil-Dubai: $0.30 /bbl
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.