Crude futures jumped over 2 percent on Tuesday and U.S. oil topped $70 for the first time in two months as Washington pushed allies to halt imports of Iranian crude, which would constrain global supplies. Brent crude rose $ 1.58 to settle at $76.31 a barrel. WTI settled 2.45 higher at $70.53 a barrel.
The U.S. government is calling on its allies to zero out imports of oil from Iran by November 4, or else face sanctions, and Washington is leaning towards granting no waivers at all. An official from the U.S. State Department said on Tuesday that it had plans to follow up on the matter with Turkey, India and China, even as the U.S. is trying not to “adversely impact” these countries, Bloomberg reports.
India imports large quantities of oil from Iran, though the country has suggested it would comply with Washington; Beijing, meanwhile, has not committed to an agreement to stop buying Iranian oil, and rising trade tensions with the United States may make such an agreement less likely.
India and China have discussed creating an ‘oil buyers’ club’ to be able to negotiate better prices with oil exporting countries and will be looking to import more U.S. crude oil in order to reduce OPEC’s sway, both over the global oil market and over prices, India’s Petroleum Ministry said on Wednesday.
The API reported a massive draw of over 9 million barrels of crude stocks sending the market up. However, the API also reported builds in both Gasoline and well as distillates seeming to suggest that the stock draw would have been due to strong exports.
Asia’s naphtha crack edged up 7 cents to $74.20 a tonne on Tuesday, the highest in about one week as recent demand gave support, but high supplies pressured premiums.
The July crack is lower at -$ 2.60 / bbl
Asia’s gasoline crack fell 5 percent to a two-session low of $4.51 a barrel due to ample supplies. The overall weak light distillates market has dragged on Asia’s refining margins which fell to the lowest in two years on Monday.
The July crack is lower at $ 7.40 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Asia’s refining margins for 10ppm gasoil slumped to their lowest levels in more than seven months, while cash differentials slipped to their lowest so far this year due to ample supplies and limited arbitrage opportunities.
Cash differentials for gasoil with 10ppm sulphur content dropped to their lowest levels so far this year, and were at a discount of 10 cents a barrel to Singapore quotes, compared with a discount of 5 cents on Monday.
The gasoil market is also being dampened due to the ongoing monsoon, when seasonal rains curb irrigation needs and also hamper travelling demand.
It is also not profitable to ship gasoil to Latin America or Europe, although there was plenty of supply from Chinese refiners that were lifting exports as they returned from seasonal maintenance.
Meanwhile, Asia’s cash differentials for jet fuel were at a discount of 33 cents a barrel to Singapore quotes, 3 cents wider than Monday’s discounts. Jet margins slipped to their lowest since early November.
The July crack is lower at $ 12.50 / bbl with the 10 ppm crack at $ 13.25 /bbl. The regrade is steady at $ 1.00 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Asia’s fuel oil crack value for 180-cst grade at less than $5 a tonne discount to Brent oil on Tuesday was the narrowest seen since Nov. 20, 2017 when it was $4.40, supported by firm demand against a smaller pool of supplies. The stronger fundamentals also pushed Asia’s cash premiums for 380-cst and 180-cst fuel oil grades to multi-year highs.
Lower fuel oil output in Venezuela due to refinery outages and a lack of crude oil, and refinery upgrades in Russia, the Middle East, India and South Korea have all contributed to tightening global supplies of the fuel, used to generate electricity and power industrial boilers and ships.
The July 180 cst crack is stronger at -$ 2.10 / bbl. The visco spread is at $ 1.70 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Due to exigent circumstances, this section may be updated with a lag of one day for this week. Yesterday, fuel oil was still just below -$2.50. As a matter of discipline, we shall wait for it to cross that level before we 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.
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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.