Crude Oil
Oil prices climbed on Thursday, with U.S. crude hitting a three-and-a-half year high, bolstered by supply concerns due to U.S. sanctions that could cause a large drop in crude exports from Iran. Brent crude rose 23 cents to settle at $77.85 a barrel. WTI rose 69 cents to settle at $73.55 a barrel.
US Energy Secretary Rick Perry said the global oil market will be “stressed” by Iranian sanctions returning in November, but that the US government is confident that increased output from Saudi Arabia and Russia can fill the gap. Perry added that some leeway for countries to meet the November deadline is still possible on a “case-by-case” basis.
Libya’s rival Benghazi faction has ordered the suspension of crude exports unless sanctioned by the company, in a move to solidify its control of Libya’s eastern ports. Workers at the 200kbd Zueitina oil terminal were told not to allow one vessel, Amore Mio II, to berth and load crude for Unipec yesterday.
India’s oil minister has informed local refiners to get ready for a “drastic reduction or zero” oil imports from Iran, according to industry sources. India is one of the largest importers of Iranian crude at around 700kbd. Indian refiners including Nayara Energy and Reliance have reportedly already started to reduce Iranian purchases due to their exposure to foreign investors and to the US financial system.
Naphtha
Asia’s naphtha crack recovered from a three-session low to reach an almost two-week high of $76.28 a tonne after strong demand overturned the impact of high oil prices for now. Premiums for first half August delivery may have risen to high single digits in the last couple of days.
The July crack has improved to -$ 2.25 / bbl
Gasoline
Asia’s gasoline crack similarly rose but only reached a two-session high of $4.37 a barrel as ample supplies capped gains.
Singapore onshore light distillate stocks, which comprise most of gasoline and gasoline blending components, edged up 129,000 barrels to 12.2 million barrels in the week to June 27. Stocks in ARA, however, dipped by 21 KT to 1.04 million tons.
The July crack is weaker at $ 7.05 / bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for 10ppm gasoil plunged to their lowest so far this year on Thursday as middle distillate inventories in Singapore climbed to their highest levels in ten weeks.
Cash differentials for gasoil with 10ppm sulphur content widened their discounts on Thursday, and were at a discount of 14 cents a barrel to Singapore quotes, compared with 10 cents on Wednesday. What is driving gasoil markets as of now are overwhelming exports from China as refinery maintenance ends.
Meanwhile, jet fuel cash differentials remained unchanged at a discount of 34 cents a barrel to Singapore quotes. The jet market would likely remain muted at least over the next few months until the beginning of the fourth quarter, which typically brings the stronger months for jet and kerosene demand.
Singapore onshore middle-distillate stocks rose 1.1 percent in the week to June 27 to 9.15 million barrels. Gasoil stocks in ARA rose as well by 22 KT to 2 million tons.
The July crack is higher at $ 12.20 / bbl with the 10 ppm crack at $ 13.15 /bbl. The regrade is higher at $ 1.25 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 180-cst crack value rose for the fourth straight session and was near a 32-week high supported by reduced supplies.
Singapore’s onshore fuel oil stocks had eased 506,000 barrels to a five-week low of 18.68 million barrels in the week to June 27. Fuel Oil stocks in ARA increased further by 80 KT to another record high of 1.6 million tons. It is a matter of time when the abundance of stocks overcomes the freight costs to open the arbitrage.
The July crack is stronger at -$ 1.95 / bbl with the visco spread at $ 1.30 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
We would today recommend hedging another tranche of 2Q18 180 cSt fuel at current values of 2.45. As mentioned earlier, it is a matter of time when the pressures of stocks in ARA overcome high transportation costs to open the arbitrage.
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.