Crude Oil
Oil prices inched up on Friday, ending the week higher after stronger-than-expected U.S. economic data brightened the crude demand outlook. Brent crude futures rose 7 cents to settle at $63.46 a barrel. WTI crude futures rose 18 cents to settle at $56.20 a barrel.
Brent futures clocked a weekly rise of about 1.7% while WTI gained about 1.2% on the week.
U.S. economic growth slowed less than expected in the second quarter with a boom in consumer spending, strengthening the outlook for oil consumption. Broader economic slowing, particularly in Asia and Europe, could weaken crude demand outside of the United States and kept prices in check.
Next week, top U.S. and Chinese negotiators meet for the first time since trade discussions between the world’s two largest economies broke down in May after nearing agreement. Any positive outcome from the talks is expected to boost oil prices.
Profits earned by China’s industrial firms contracted in June after a brief gain the previous month, fuelling concern that a slowdown in manufacturing from a bruising trade war will drag on economic growth. Industrial profits fell 3.1% in YoY, following a 1.1% gain in May.
The growth outlook for nearly 90% of the more than 45 economies surveyed was downgraded or left unchanged. That applied not just to this year but also 2020.
A rally in equities and drop in production from Mexican state oil company Pemex also helped push oil prices up.
US energy firms this week reduced the number of oil rigs operating for a fourth week in a row, cutting 3 rigs to bring the total count down to 776, putting the rig count down for an eighth consecutive month. That compares with 861 rigs operating during the same week a year ago.
Naphtha
Asia’s naphtha crack snapped four straight sessions of declines to trade at $29.43 a tonne on Friday, pulling off this week’s low of $27.15 a tonne hit on Thursday. The naphtha crack was at $31.50 a tonne at the start of the week. Ample naphtha supplies as well as stiff competition from low prices of liquefied petroleum gas (LPG), an alternative petrochemical feedstock, have weighed on naphtha market sentiment
The August crack is lower at -$ 6.25 /bbl
Gasoline
Asia’s gasoline crack extended gains on Friday to reach a four-day high of $5.59 a barrel as shrinking inventories continued to support. Gasoline stocks at the ARA hub edged 1%, or 13 KT higher in the week to Thursday to a four-week high of 1.24 million tonnes.
The August crack is higher at $ 6.35 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil inched lower by two cents to be at 17 cents a barrel to Singapore quotes on Friday.
The gasoil market would likely stay under pressure in the short-term on increasing supplies, especially from China, which issued its third batch of export quotas for refined oil products for 2019 earlier this week.
Gasoil stocks in ARA rose by 12 kt to 2.98 million tonnes.
Cash premiums for jet fuel were at 30 cents a barrel to Singapore quotes on Friday, up from 26 cents per barrel in the previous session.
The August crack for 500 ppm Gasoil is lower at $ 15.90 /bbl with the 10 ppm crack at $ 16.60 / bbl. The regrade is at +$ 0.10 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month East-West (EW) arbitrage rose on Friday as tight Singapore supplies widened the price differential between Singapore and west European high-sulphur fuel oil (HSFO) prices towards a record reached earlier in the month.
The 380-cst EW spread for August climbed to $42 a tonne, up from $40.25 a tonne in the previous session and near the record $42.25 a tonne on July 11.
Fuel oil inventories in the ARA hub fell to an 11-week low of 1.014 million tonnes in the week ended July 25. ARA fuel oil inventories were 24% lower than a year ago and were near the five-year average of 1.007 million tonnes for this time of the year.
The August 180 cst crack is stronger at + $ 2.90 / bbl with the visco spread at $ 1.75 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The fuel oil crack has strengthened even further. However, with the month of August about to start, we will refrain from hedging unless we see another huge jump tomorrow. It may be noting that the September crack is not rising along with the August crack suggesting that the market believes that this shortage is not very long lived.
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.