Crude Oil
Oil prices eased on Wednesday after U.S. data showed a surprise build in domestic crude inventories. Brent crude futures fell 53 cents to settle at $ 81.34 a barrel. WTI crude futures fell 71 cents to settle at $71.57 a barrel.
In other news, the US raised interest rates by 0.25% yesterday to 2.25%. This should further strengthen the US Dollar.
Late in the evening, the US energy secretary Rick Perry stated that the US had no intentions of controlling oil prices through release of supplies from its SPR. While conceding that it was not possible to control prices this way, he also mentioned that the US sees adequate supplies of crude notwithstanding the sanctions on Iran.
The DOE reported a build of 1.85 million barrels in crude stocks. The build appears to have happened due to a huge drop in run rates to 90.4% from 95.4% the previous week. Not even record export levels of 2.6 million bpd could offset this drop in production.
Gasoline stocks built due to a huge drop in demand, ostensibly due to high prices. Gasoline demand dropped below 9 million barrels per day for the first time since the week ending February 23. Gasoline stocks are at a seasonal high.
The draw in distillate stocks appears to have arisen mainly out of a drop in production. Having said the above, they are still higher than stock levels in 2017. We are now arriving at a period when refineries traditionally switch to distillate mode of operation. The current state of stocks and demand would indicate that this shift may be called for sooner rather than later.
Click Here for details graphs of the US DOE data.
Naphtha
Asia’s naphtha crack recovered 4.13 percent on Wednesday to $98.73 a tonne, its highest since Sept. 18, after falling for two straight sessions. Markets expect abundant supplies to ease in second-half November as Europe may be shipping fewer cargoes to Asia. Additionally, demand was expected to improve for cargoes delivering in second-half November versus first-half November as Japan would have completed its naphtha cracker maintenance season by then.
The October crack is higher at -$ 0.55 /bbl
Gasoline
Asia’s gasoline crack fell for the second straight session, to $7.03 a barrel, its lowest since July 20 as high oil prices were denting demand.
In the U.S., the volume of traffic on highways has stopped growing and this has impacted gasoline consumption.
Fujairah light distillate stocks were virtually unchanged at 5.89 million barrels.
The October crack is higher at $ 9.50 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for gasoil with 10ppm sulphur content dipped to 71 cents a barrel to Singapore quotes, from 78 cents a barrel on Tuesday. The Oct/Nov time spread for 10ppm gasoil narrowed to 92 cents per barrel from 94 cents a day earlier.
Meanwhile, cash discounts for jet fuel widened to 35 cents a barrel to Singapore quotes, compared with a discount of 25 cents on Tuesday.
Fujairah middle distillate stocks were at 3.98 million barrels in the week ended Monday, the lowest levels in four weeks. While the stock levels dropped by 5% compared to the previous week, they were about 52 percent higher than the same time last year.
The October crack is nevertheless higher at $ 15.90 / bbl with the 10 ppm crack at $ 16.70 /bbl. The regrade has dropped to -$ 0.60 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The second-month East-West arbitrage spread was trading at a near two-year high on Wednesday as expectations of tightening fuel oil supplies in Asia continued to feed bullish sentiment, but arbitrage opportunities from West of the Suez to Singapore were limited by strong backwardation in the fuel oil market.
The 380-cst fuel oil November arbitrage spread was at $23.75 a tonne, up from about $23 a tonne in the previous session and its highest since December 2016.
Meanwhile, fuel oil inventories in the Fujairah oil hub sank to 6.591 million barrels last week, their lowest levels in nearly seven-months. Fujairah fuel oil inventories are now 44 percent lower from the same time last year, the widest year-on-year deficit since the week to Feb. 26.
The October 180 cst crack is lower at -$ 3.80 / bbl with the visco spread at $ 1.20 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The Cal-19 Distillate cracks are once again expanding. Our next targets for Gasoil (10 ppm) and Jet are $ 19.00 and $ 19.25 /bbl respectively should they be reached.
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.