Crude Oil
Crude futures continued their meteoric rise upward as the DOE reported a very large draw in crude stocks. Brent crude rose $ 1.31 to settle at $77.62 a barrel. WTI settled $2.23 higher at $72.86 a barrel.
The plunging US stockpiles exacerbated the situation caused by the US insisting that the world stop purchasing crude from Iran and the turmoil in Libya.
The DOE corroborated the massive draw of close to 10 million barrels of crude stocks. While imports increased by around 100 kb/d, exports jumped by a massive 600 kb/d to touch a record 3 million barrels per day. Crude stocks were also impacted by one day of production disruption of Syncrude a supplier from the Canadian oil sands which locked in 350 kb/d of Canadian supplies. An increase in refinery runs to a record 97.5% also helped draw crude stocks.
Gasoline demand grew strongly to 9.7 mb/d. While distillate demand fell in the US, this was compensated by a strong increase in exports of over 500 kb/d. The material balance statement suggests that the crude draw is perhaps a bit exaggerated whereas the product build is slightly misleading.
Naphtha
Asia’s naphtha eased to a three-session low of $73.38 a tonne on Wednesday as high oil prices countered firm demand.
The July crack is weaker at -$ 2.50 / bbl
Gasoline
Asia’s gasoline crack was at a four-session low of $3.95 a barrel, just 35 cents shy of a 22-month low of $3.60 hit on June 20.
Overall supplies were ample although Japanese gasoline inventories fell 430,000 barrels to a seven-week low of 10.53 million barrels in the week to June 23. Fujairah inventories, however, rose by 481 kb to 6.5 million barrels.
Exports of European gasoline to West Africa were on the rise, with around 800,000 tonnes expected to be shipped to the latter this month.
The July crack is stronger at $ 7.35 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for jet fuel widened their discounts on Wednesday, hurt by weaker demand amid growing supplies in the region, while refining margins for the aviation fuel plunged to their lowest this year due to firmer crude oil prices.
Jet cash differentials dipped to their lowest levels since early January and were at a discount of 34 cents a barrel to Singapore quotes, compared with 33 cents on Tuesday. Jet margins or cracks dropped to as low as $12.93 a barrel over Dubai crude in Asian trading hours — levels not seen since Nov. 6.
Meanwhile, cash differentials for gasoil with 10ppm sulphur content remained unchanged at a discount of 10 cents a barrel to Singapore quotes. Asian margins for 10ppm gasoil have fallen about 18 percent this month, and were around $13 a barrel over Dubai crude on Wednesday.
Middle distillates inventories in the Fujairah Oil Industry Zone (FOIZ) rose to levels not seen since October. Stocks for middle distillate products climbed about 5 percent from a week ago to 2.89 million barrels in the week ended June 25.
The July crack is lower $ 12.10 / bbl with the 10 ppm crack at $ 13.00 /bbl. The regrade is steady at $ 1.10 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The discount on Asia’s 180-cst fuel oil crack to Brent on Wednesday narrowed to a fresh 31-week high as persisting tight supplies countered strong oil prices. The 180-cst crack value was at a discount of $4.63 a barrel, the narrowest since Nov. 20, 2017 when it was at $4.40.
Although the fuel oil stocks in Fujairah were seen higher, current levels were considerably lower when compared to the same period from a year ago. Fujairah’s fuel oil inventories had reached a two-week high of about 9 million barrels in the week to June 25. Current stockpiles in Fujairah were still about 27 percent lower versus the same period last year.
The July crack is stronger at -$ 2.15 / bbl with the visco spread at $ 1.35 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
While distillates are weakening in the prompt, the Cal 19 strip appears to be slightly stronger today. Also, Jet in 1Q19 has jumped up quite nicely to a value of $1.30 / bbl…
We recommend a hedge of the commodity at these levels.
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.