28 Feb 2017
oil-barrel

Crude Oil

Crude showed mixed movement on Monday.  Brent lost 6 cents to close at $55.93 /bbl while WTI rose by 6 cents to settle at $ 54.05 /bbl.  It may be noted that the Brent future is slated to expire today.  The more active Brent May Future settled at $ 56.52 / bbl

The uncertainty of direction continues to plague the market.  Data over the next week will show, not only stock levels everywhere, but also levels of compliance with promised levels during the month of February.  The silence on this fact is almost deafening as OPEC continues harping on compliance in the month of January.  We will also know more about production levels of countries outside the purview of cuts like Nigeria and Libya.  Another statistic to watch for is export levels.  Readers may recall that while Russia cut production (albeit by only 100 KB as against a promise of 600 KB), its exports in the month of January actually increased.

In a technical requirement, a lot of funds are going to be required to move their exposure from Dec-17 to Jun-17.  In order to achieve this, they will be buying Futures settling in June and selling the December exposure.  This action is technically expected to raise nearby prices higher.

Naphtha

The naphtha crack continued to recover albeit on expectations that supplies will stay tight during April.  The March MOPJ crack is valued at $ 1.50 / bbl.  The Singapore crack for March is valued at + $ 0.30 /bbl.

Gasoline 

The gasoline crack unfortunately, is still plagued by high stock levels.  The March crack is valued at  $ 11.6/bbl.

Middle Distillates

Gasoil too continued to weaken.  Supplies coming out of India suggested that Indian consumption may not be as high as previously thought.  The March crack is valued at  $12.35 / bbl .  The regrade continues to languish at -$0.75 /bbl.

Our take on the gasoil market is that India is the country to watch over the next few months as it upgrades fully to Euro IV standards for the country.  This may see India looking to swap the grades in a bid to meet domestic demand.

Fuel Oil

Fuel Oil continued its bull run as the market expects fewer supplies to arrive in March and April.  The market also expects some sort of trading play.  However, the exact nature of the play is not known. The March crack is valued   -$ 2.8/bbl and April around -$ 3.25 /bbl.

We would recommend hedging at these levels. The main rationale for this recommendation is that one does not know how long such trading plays would last.  If expectations of low supplies are belied, the crack could fall below -$5.0 /bbl in a hurry.  On the other side,

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.
Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity

 

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