Crude Oil
Oil prices were mixed on Wednesday as fears about the coronavirus outbreak battled with fear about deeper or longer cuts by the OPEC. Brent crude futures rose 30 cents to settle at $59.81 a barrel. WTI crude futures fell 15 cents to settle at $53.33 a barrel.
Financial markets are trying to assess economic fallout as the virus spreads out of China where the death toll continues to rise, while airlines cut flights to China.
China’s National Health Commission said on Thursday the total number of confirmed deaths from the coronavirus in the country has risen by 38 to 170 as of end-Wednesday, as the number of infected patients rose by more than 1,700 to total 7,711.
DOE data
U.S. crude inventories grew more than expected last week, running contrary to API data as well. What makes this even more bearish is that our material balance report actually suggests a higher build. The build appears to have been mainly caused by run cuts. Run rates were at 87.2%, the lowest level for the last 7 years for this time of the year.
Gasoline stocks rose for a 12th straight week to another all-time high at 261.2 million barrels, the EIA said. Demand for gasoline has been abysmally low. However, some heart can be taken from the fact that the Material Balance statement above is actually reporting a draw.
The draw in distillates, however, appears to be overstated as the drop in demand more or less matched increase in net exports.
Naphtha
Asia’s naphtha crack hit a two-week high as the fuel is structurally short in the region. Despite petrochemical makers having cut runs by 5-10% and high volumes of cargoes arriving in January from the West including Europe and the Mediterranean, fundamentals were seen strong.
The February crack has jumped up to – $ 1.85 / bbl., a level not seen in a long time.
Gasoline
Asia’s gasoline crack recovered by 31% to reach a two-session high of $3.85 a barrel. It had dived to a 7-month low in the previous session as the coronavirus spreading through the region dented demand.
China will be adding even more refining capacity in the coming year, a factor which does not augur too well for refining margins. China had already added 800 kbpd of refining capacity last year – 80% of Britain’s refinery throughput.
The February crack is higher at 6.15/ bbl.
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil in Singapore fell to 13 cents a barrel to Singapore quotes on Wednesday, down from Tuesday’s 23 cents per barrel.
Cash premiums for jet fuel were at 30 cents per barrel over Singapore quotes on Wednesday, compared with a premium of 36 cents per barrel on Tuesday.
Middle-distillate inventories in Fujairah rose 26.6% from a week earlier to 4 million barrels in the week to Jan. 27, data via S&P Global Platts showed. Stocks of middle distillates in the Fujairah oil hub have averaged 3.8 million barrels so far in 2020, compared with a weekly average of 2.4 million barrels in 2019.
The February crack for 500 ppm Gasoil has fallen to $10.85 /bbl with the 10 ppm crack at $ 11.45 / bbl. The regrade is at -$ 0.65 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s 0.5% VLSFO refining margins and cash premiums edged higher on Wednesday, after falling steadily over the past week.
Trade liquidity in Asia’s physical and derivatives market for fuel oil was thin amid Lunar New Year celebrations in China and other parts of Asia.
Residual fuel oil inventories in Fujairah fell by 1.344 million barrels (11%) to a two-week low of 10.45 million barrels in the week to Jan. 27, S&P Global Platts data showed. However, the weekly fuel oil inventories at FOIZ were 28% higher compared with year-ago levels. Fuel oil stocks at FOIZ averaged 10.82 million barrels (1.70 million tonnes) in 2019.
The February 180 cst crack has improved to -$ 10.20 / bbl with the visco spread at $ 0.80 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
No fresh action for today. Jet consumers may however examine the possibility of putting in place hedges either off crude or off the flat price in jet.
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.