Crude Oil
Oil futures gained about 2 percent on Wednesday after U.S. crude inventories unexpectedly plummeted. Brent crude futures rose $1.18 to settle at $66.39 a barrel. U.S. crude rose $ 1.44 to settle at $56.94 a barrel.
Saudi Energy Minister Khalid al-Falih said that OPEC and its partners were already “taking it easy” in response to a tweet from Trump on Monday, who told the group to “relax” on production cuts. Falih said the group may need to extend its agreement to curb output until the end of 2019.
Also in Riyadh, OPEC Secretary General Mohammed Barkindo commented that managing world supply is difficult when two members – Iran and Venezuela – are under sanction from the United States.
Russian energy minister Alexander Novak also said this week the oil market was more or less stable and price volatility, which is unwelcome to both producers and consumers, was low.
Venezuelan oil minister, Manuel Quevedo, maintained that the country’s oil was exports were steady at 1.2 million barrels per day.
In other news, US trade representatives ruled out the possibility of a comprehensive trade agreement with China in the immediate future saying that it would take some time and, subsequently, implementation would be key.
The huge draw down in crude stocks, after five consecutive weeks of builds, was due to net crude imports slowing to a record low of 2.6 million barrels per day in the wake of issues with Canadian production and the Keystone pipeline, reduction in Saudi imports and the sanctions against Venezuela.
Canadian imports have fallen from around 4 mb /d in mid Jan to 3 mb / d last week. Saudi imports have dropped by around 600 kbd as the Kingdom strategically has been making exports to the US costlier. Venezuelan imports were down to 208 kbpd from about 523 kbd in mid Jan. Our estimate is that once issues with the Canadian supplies are addressed, US stocks would not be suffering as bad a hit.
What remains key this year is the level of demand for diesel. The fact that the draw in crude stocks notwithstanding, diesel stocks being virtually unaffected despite the low levels of refinery utilization (87.1%) indicates to a sufficiency of product stocks.
Naphtha
No fresh news on Naphtha today, but the crack appears to be strengthening as gasoline cracks improve.
The March crack is higher at -$ 6.10 /bbl
Gasoline
Asia’s gasoline margins rose for the sixth time in about a week to reach a 1-1/2 month high of $1.52 a barrel to Brent crude on Wednesday, supported by demand and coming refinery maintenance. The crack levels had recently swung back to a premium after mainly being at discounts since December.
Lower fuel prices and coming elections could be some of the reasons behind Indonesia’s firm demand recently. Demand is coming at a time of heavy refinery maintenance. 2.28 million barrels per day of crude distillation capacity in Asia would be down.
Demand for gasoline also appears to be emerging from India as several refineries are expected to go into turnaround to cater to the prospective improvement in specifications of fuel sold.
Light distillate stocks in Fujairah dropped sharply by 938 KB last week. However the total stocks, at 10.45 million barrels are 24% higher than last year’s levels.
The March crack has eased to $ 1.75 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a discount of 16 cents a barrel to Singapore quotes on Wednesday, compared with a discount of 17 cents per barrel a day earlier.
Cash discounts for jet fuel narrowed to 22 cents a barrel to Singapore quotes on Wednesday, compared with a discount of 26 cents a barrel on Tuesday.
Distillate stocks in Fujairah dropped by 586 kb to 1.81 million barrels. Stocks are 33% lower than previous year’s levels.
The March crack is marginally lower at $ 15.30 /bbl with the 10 ppm crack at $16.30 /bbl. The regrade has dropped to – $ 0.95 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Sentiment on Asian fuel oil improved slightly on Wednesday as some industry participants expected the market to have bottomed out this week following steady losses since around mid-February.
Despite higher crude oil prices on Wednesday, the March 380-cst barge crack discount extended gains to minus $3.63 a barrel to Brent crude, from minus $4 a barrel on Tuesday. The front-month crack discount on Monday was at its narrowest since Feb. 1.
Cash premiums for 380-cst fuel oil climbed to a premium of $1.31 per tonne to Singapore quotes, from a near 10-month low of $1.12 a tonne in the previous session, and snapped three straight sessions of declines.
Meanwhile, fuel oil stocks at Fujairah jumped 19 percent in the week to Feb. 25 to 9.79 million barrels, a near seven-month high, data from S&P Global Platts showed..
The March180 cst crack has jumped to $ 0.95 / bbl with the visco spread at $ 0.95 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to report today.
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.