Crude Oil
Oil fell about 3 percent on Monday, its biggest one day percentage drop in a month, after an increase in U.S. crude drilling pointed to further supply growth amid continuing concerns about a global economic slowdown. Brent crude oil futures sank $1.71 to settle at $59.93 a barrel, while WTI crude futures slumped $1.70 to settle at $51.99 a barrel.
The last time both crude benchmarks saw bigger daily percentage drops was on Dec. 27.
Notwithstanding yesterday’s drop, crude futures remain on course for their strongest monthly gains in more than two years following production cuts by the OPEC+ group this month. Brent has risen nearly 12 percent so far in January, which would be the largest monthly percentage increase since December 2016. WTI has risen more than 13 percent this month, the biggest jump since April 2016, when it surged almost 20 percent.
Investors have added to bets on a sustained rise in the oil price this month for the first time since September. Nevertheless, several negative factors loom in the horizon.
Uncertainty about how long the U.S. government will stay open after Washington agreed to end a historic shutdown has dampened investor optimism.
Failure to achieve concrete, speedy resolution to the trade war between Washington and Beijing has also weighed on futures prices.
The trade war has certainly damaged not only China’s economy but has had ripple effects on global economy as well. Industrial companies in China reported a second monthly fall in earnings in December, despite the government’s efforts to support borrowing and investment. The euro zone economy has performed worse than expected in recent months and global uncertainty is weighing on economic sentiment, European Central Bank President Mario Draghi said on Monday, repeating the bank’s recent warnings about growth. Japan has cut its assessment of exports in January for the first time in three months due to the trade war between the United States and China in a warning that the fallout is spreading to the world’s third-largest economy.
In other news, the Trump administration on Monday imposed sweeping sanctions on Venezuelan state-owned oil firm PDVSA, aimed at severely curbing the OPEC member’s crude exports to the United States and at pressuring socialist President Nicolas Maduro to step down.
Naphtha
Asia’s naphtha crack was at a six session high of $38.60 a tonne on Monday, thanks to weaker oil prices and steady demand.
South Korea’s KPIC and Taiwan’s CPC were looking to buy naphtha for first-half March delivery and March 6-26 delivery, respectively.
The February crack has fallen slightly to -$ 6.35 /bbl.
Gasoline
Asia’s gasoline crack stayed at a discount for the tenth straight session due to a stubborn glut. The gasoline crack was at a discount of $1.62 a barrel to Brent crude on Monday, narrower versus $2.03 a barrel on Friday.
The February crack has dropped to -$ 1.35 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10ppm gasoil narrowed to 30 cents a barrel to Singapore quotes on Monday, the smallest discounts since Nov. 22. They were at a 38 cents discount on Friday.
Meanwhile, the February/March time spread for 10ppm gasoil narrowed to a discount of 56 cents a barrel on Monday, from 60 cents on Friday.
Quite a few gasoil cargoes are planned to be shipped towards the West, thanks to stronger demand, but the arbitrage window is not quite open at current freight rates. The exchange of futures for swaps (EFS), which determines the gasoil price spread between Singapore and North West Europe, was around minus $19 per tonne on Monday.
Gasoil demand in Europe, which uses the industrial fuel for heating properties during winter, has increased due to colder temperatures over the last few days and Asian traders are trying to fetch higher values for their cargoes from outside the region, according to market watchers.
Jet fuel discounts were at $1.73 a barrel to Singapore quotes, the biggest discounts since December 2008. They were at $1.70 a barrel on Friday.
The February crack has dropped to $ 12.65 /bbl with the 10 ppm crack at $13.60 /bbl. The regrade is higher at $ 0.75 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front month high sulphur fuel oil crack narrowed its discount to Brent crude on Monday as crude oil prices weakened.
The February 380 cst barge crack against Brent crude was at minus $4.83 a barrel on Monday, compared with minus $5.05 a barrel in the previous session. The front month crack discount hit a nearly eight week low last week at minus $4.67 a barrel.
The February 180 cst crack has improved to $ 0.50 / bbl with the visco spread at $ 0.40 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to do or note about the markets today.
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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.