Crude Oil
Oil prices rose notwithstanding a surprise build in US Crude and Distillate inventories.
Brent rose by 55 cents to $35.59 a barrel. The Brent front month contract expires today. WTI crude futures rose by 90 cents to $33.71 a barrel.
The move in U.S. crude narrowed Brent’s premium over WTI to its lowest since mid-April.
Oil prices have rebounded in recent weeks on anticipation of improved demand after the coronavirus pandemic sapped worldwide consumption by roughly 30%. Overall investment is dropping and U.S. production cuts are balancing out the supply glut, but demand still has not bounced back entirely.
The production cuts are also helping to keep sentiment buoyed. Saudi Arabia and some other OPEC oil producers are considering extending record high output cuts until the end of 2020 but have yet to win support from Russia, according to OPEC+ and Russian industry sources.
However, Rosneft does not have enough crude to ship to buyers with which it has long-term supply deals, making it hard for the Russian company to continue with record oil cuts beyond Jun’20, sources told Reuters on Thursday.
South Korea’s factory output shrank at its sharpest pace in more than 11 years in Apr’20, with industrial output contracting 6.0% MoM, the largest since a 10.5% MoM plunge in Dec’08, official data showed on Friday.
GDP data out later on Friday is expected to show India’s economy grew at its slowest pace in at least two years in the Mar’20 quarter. The median forecast put annual economic growth at 2.1% in the Mar’20 quarter, lower than 4.7% in the Dec’19 quarter.
Markets are also concerned Washington could slap trade sanctions on China due to Beijing’s move to impose a new security law on Hong Kong. Uncertainty about Russia’s commitment to continuing deep output cuts kept the rally in check.
EIA data
U.S. crude inventories rose 7.9 million barrels last week, exceeding expectations, due to a big increase in imports from Saudi Arabia, the EIA said. US crude stocks, at 534.4 million barrels are just about a million barrels short of the all time high reported in 2017.
Crude inventories at the U.S. Cushing storage hub in Oklahoma fell 3.4 million barrels.
While refining rates rose to 71.%, production of gasoline was almost stagnant and distillate production actually fell. A decrease in gasoline imports coupled with an increase in demand resulted in a small draw being reported. Distillate stocks continued to rise to seasonal highs, which eases pressure on distillate cracks for some time.
However, our material balance statement suggests a slightly different scenario.
Crude inventories, as per our statement above could have risen much more than reported. Equally, Gasoline inventories could have fallen much more than reported.
Covid 19
At a global level, the death toll from the COVID-19 virus rose to 361,549 (+4,612 DoD) yesterday, with the total number of confirmed infections at 5,900,907 (+116,304 DoD). (Click here for details).
Naphtha
Asia’s naphtha crack fell to its lowest in three sessions on Thursday, hit by slower demand from South Korea as most buyers in the country have secured cargoes for delivery in the first half of July. The crack value ended at $41.88 a tonne, down 5% from a one-month high of $44.10 hit on Wednesday.
Overall, spot naphtha prices have risen this week for July cargoes, versus previous deals for June cargoes, as sellers expect supplies to be tighter in July compared with May and June.
The June crack is lower at -$2.95 / bbl.
Gasoline
Gasoline crack’s discount to Brent crude narrowed to $1.10 a barrel, versus $1.92 in the previous session, on moderate drawdown on supplies.
Singapore onshore light distillates stocks, which comprise mostly gasoline and blending components for petrol, fell by just over 1 million barrels, to reach an 8-week low of 14.2 million barrels in the week to Wednesday, data from Enterprise Singapore showed.
The June crack is steady at -$1.00 /bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10 ppm gasoil were at 50 cents per barrel to Singapore quotes on Thursday, the smallest since March 26.
The front-month time-spread for 10 ppm gasoil in Singapore traded at a discount of 16 cents per barrel on Wednesday, a level not seen since March 11.
Cash discounts for jet fuel remained unchanged at 83 cents a barrel to Singapore quotes on Thursday.
The jet fuel market has found support in the last couple of weeks as some regional markets opened up domestic routes, while the China aviation authority said it may consider increasing international flights if coronavirus risks are under control.
Singapore onshore middle distillate stocks rose 5.6% to a six-week high of 14.9 million barrels in the week ended May 27, Enterprise Singapore data showed. The weekly Singapore middle distillate inventories have averaged at 12.4 million barrels so far in 2020. This week’s stocks were 24.9% higher year-on-year.
The June crack for 500 ppm Gasoil has plummeted to $0.95 /bbl with the 10 ppm crack at $ 3.45 / bbl. The regrade is at -$ 1.90 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month contango for Asia’s 0.5% VLSFO fell to its widest discount in more than three weeks on Thursday. The June/July time-spread fell to a discount of $9 per tonne, its lowest since May 5, and down from $8 a tonne in the previous session.
This came as Singapore’s residual fuel oil inventories fell 2% in the week ended May 27, as net import volumes plummeted to a near two-year low. Onshore fuel oil stocks dropped 575 KB data from Enterprise Singapore showed.
The June crack for 180 cst FO is higher at – $4.00 /bbl with the visco spread at $1.25 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for today.
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 refinery.
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.