Crude Oil prices continued to rise, settling higher for the fourth consecutive trading session. Brent gained 82 cents to settle at $46.65 /bbl whilst WTI gained 86 cents to settle at $44.24 /bbl. This was after Brent touched an intraday high of $47.29 /bbl which was was also the highest in the last seven days.
However, the gains in crude prices are ascribed to short covering and a weak dollar as opposed to rebalancing of demand supply economics. This is evidenced by the bearish US inventory data released yesterday by the American Petroleum Institute which showed that crude inventories rose 851,000 barrels in the week to June 23 to 509.5 million. This is against an expected decline of 2.6 million barrels.
Adding to fears of a persistent supply glut are announcements by some OPEC delegates that the cartel will not rush into further output cuts or end the exemptions some member countries enjoy. However, a meeting is scheduled to be held in Russia next month to consider further steps.
The naphtha cracks have been dragged down by a stronger crude prices and adequate supplies. This has also pressurized premiums that sellers are getting for their cargoes. Indian Oil Corporation (IOC) for example, sold July loaders at premiums lower than what it achieved for its June loaders.
The July crack is lower at -$0.70 /bbl
Gasoline cracks have also weakened on the back of bearish API inventory data which saw stocks rising by 1.4 million barrels, despite the ongoing U.S. summer driving season. This is consistent with out view on gasoline published yesterday.
The July crack is weaker at $ 9.75 /bbl
Distillate cracks continue to be supported with strong demand emanating out of Mozambique, Kenya, South Africa and India. Mozambique, which mainly imports diesel India and the Middle East, plans to lower the sulphur specification of diesel from the current 500 ppm to 50 ppm from mid-2017. This shift will support cracks as demand for low sulphur gasoil will remain strong.
In other news, analysts are estimating that global jet fuel consumption will outstrip production over the next four years as demand for aviation strengthens. While real GDP growth for 2016 was relatively low at 2.5%, aviation demand remained strong across the main markets in Asia, North America and Europe.
The July crack is slightly higher at $ 11.10 /bbl with the July regrade at -$ 0.40/bbl
Fuel oil cracks have eased slightly with crude prices rising over the past few days. However, the cracks are expected to remain supported amid robust demand and limited supplies. Western fuel oil flows into East Asia for July have been notionally assessed at about 2.8 million tonnes, well below June’s four-month high of around 5.2 million tonnes (which had been largely due to cargoes spilling over from May). Adding to the tightening supplies is the recent outage at Mexico’s Salina Cruz refinery which exports its fuel oil to Asia.
The The July crack is slightly lower at $0.20 /bbl with the visco spread unchanged at -$1.05/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.