Crude Oil
The weight of the OPEC meeting on market sentiment was never more apparent than today as crude recovered almost all its losses on Friday.
To us, reaching a meaningful consensus that will support price looks extremely difficult to us. For one, Saudi Aramco said that it expects the market to rebalance itself anyway in 2017 therefore a cut may not be necessary. This may be advance posturing in defence of its decision to allocate extra supplies in January 2017. Further, it did not attend yesterday’s meeting with the non OPEC suppliers leading to its cancellation.
On the flip side, Iraq said it would work towards reaching a consensus with the group.
Even if a consensus were to be reached, that such consensus will be implemented appears doubtful to the whole world.
Therefore we tend to agree with one commentator who stated “It is only a matter of timing as to when to short this market, i.e. before or after the announcement of the outcome.
Naphtha
Naphtha margins eased further on Monday as there seemed to be more than adequate supplies reaching the market. December supplies are expected to reach 1.4 Million tons which is much higher than an earlier estimate of 1 million tons. In addition, supplies in January are expected to cross the 1 Million ton mark as well.
China’s naphtha imports for October fell below the 5 year average for the first time since late 2013.
The December crack is showing a value of just around $ 1 /bbl which is similar to prior levels.
Gasoline
Gasoline exports from China were reported at 871,000 tonnes in October, higher than the monthly average for the year to date by around 13%.
The Gasoline crack for December recovered to Friday’s levels of $11.0 / bbl for December.
Middle Distillates
The physical gasoil market saw strong buying from Hin Leong even as Winson Oil appears to have stopped buying further.
However, there appeared to be ample supplies as Essar Oil was seen to be offering gasoil and jet for late December.
However, the gasoil and jet cracks for December strenghthend by 30 cents $ 11.25 /bbl for gasoil.
The regrade has gone from strength to strength being currently valued around $ 2.0/bbl for December. While we had been recommending selling the January regrade from the time it was around $ 1.30 /bbl (currently close to $ 1.85), we would still recommend adding more positions around the $ 2 / bbl level.
Fuel Oil
Traders believe that prices traded in the window were ‘elevated’ in the midst of a volatile crude market. The 180 cst fuel oil crack for December strenghtened further to show a value of around -$ 0.50/bbl. The value for the January crack was at – $ 1.40 / bbl .
We are of the opinion that these levels are unsustainable and would recommend selling these levels.
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.