Crude Oil
Oil prices corrected on Friday as some traders booked profits from length before the weekend. Brent crude futures fell 25 cents to settle at $74.29 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 92 cents to settle at $68.69 a barrel.
For the week, Brent gained 1.7% buoyed by the disruption to Saudi flows. WTI however posted its fourth straight weekly decline, settling 2.5% lower.
A draft proposal to roll back US automobile efficiency requirements was obtained and published by the New York Times. The proposal drafted by federal regulators purports to increase US fuel consumption by 500 kbd while reducing “societal costs” by roughly half a trillion dollars through 2029
Active rigs in the US rose by 3 to 861, the first rise after 3 weeks.
Stronger than you think………..
Prices tested the the 100 DMA for two days last week before finally overcoming the resistance in an ongoing struggle for direction. However, the candle for the week was even shorter than that of the previous week with a height of $2.33 cents which lies totally inside the candle for the previous week. The price movement suggests a strong bullish undercurrent supported at the 100 DMA
A falling channel seems to be forming in the weekly charts. While last week’s candle is comfortably in the middle of the channel, the shorter candles seem to indicate greater uncertainty. With prices having climbed above the 100 DMA, the target of $69.00 looks less certain.
Trading Strategy
The wild swings of the first two days would have eliminated both shorts and longs. However, Wednesday gave some strong direction and we should be long for now as long as prices stay above the 100 DMA with a target of first $ 76.00 and then $ 78.00. Those with a bearish bias, can consider selling around here and adding below $ 71 with a target of $ 69.00 /bbl.
Supports and Resistances
The first support currently is the 100 DMA at the $ 74.00-10 range. Further below, supports lie in the $ 73.25-50 area and then in the $ 71.65-75 area
Resistances would lie first at last week’s high of $ 74.85-75.00, then around $ 75.50 – 75 range and then in the $76.25 – 76.50 area.
For monthly and bigger images of charts, please see our Technical Views Page.
Naphtha
Asia’s naphtha physical crack extended gains on Friday, climbing to a 2018 high of $122.55 a tonne on strong demand and tight supplies caused by fewer incoming cargoes from the West. Demand has been strong this week, with many buyers snapping up open-specification and heavy full-range grades for delivery in the first half of September. Tight supplies have driven up premiums of open-specification naphtha, though levels still lag this year’s high of $15-16 a tonne in May for cargoes delivering in the first half of July to Taiwan and South Korea.
The August crack has strengthened to $ 0.85 /bbl.
Gasoline
Asia’s gasoline crack rose to $8.15 a barrel on Friday, up from $8.08 in the previous session.
Gasoline stocks in the ARA region fell by nearly 13 percent in the week to Thursday to nearly a seven-month low of 945 KT. The current level was still 9.3 percent higher than a year ago..
The August crack has dropped to $ 9.40 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Asia’s cash differentials for 10ppm gasoil flipped into a premium for the first time in more than a month as crude prices eased on Friday. The front-month time spread, which is at its highest level of backwardation in more than six weeks, is also helping to firm up the fundamentals, but limited arbitrage opportunities and additional supplies from China and India might hinder further tightening of the market in the near term.
Cash differentials for gasoil with 10 ppm sulphur content were at a premium of 1 cent a barrel to Singapore quotes, compared with a 1 cent discount on Thursday.
Jet cash premiums rose to 7 cents a barrel to Singapore quotes on Friday, compared with Thursday’s premium of 6 cents.
Gasoil stocks in the ARA region increased by 5.4 percent in the week to Thursday. Gasoil inventories for the week to July 26, which rose because of weak demand from inland markets, were at 2.39 million tonnes, up from 2.27 million tonnes a week earlier. Jet fuel inventories fell 5 percent to 672 KT. Compared with year-ago levels, gasoil inventories were about 15 percent lower, while jet fuel stocks were up about 15.5 percent.
The August crack has fallen to $ 14.10 / bbl with the 10 ppm crack at $ 15.00 /bbl. The regrade is higher at $ 0.90 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The 380-cst front-month time spread and fuel oil crack rose to fresh highs on Friday amid steady demand for the fuel and few signs of easing supply constraints after months of persistently low arbitrage supplies reduced inventories in the city-state to a more than six-year low this week.
The Aug/Sept 380-cst time spread climbed to a more than 3-1/2 year high of $9.75 a tonne on Friday, up from $8 a tonne in the previous session.
The August barge crack for 380-cst fuel oil to Brent crude to minus $7 a barrel on Friday, up from minus $7.40 a barrel in the previous session.
Japan’s biggest electric utilities are firing up old fossil fuel power plants and ramping up others that are already operating, pushing to meet demand as power prices hit record highs amid a deadly heatwave.
Weekly fuel oil stocks in the ARA oil and storage hub slipped by 34 KT to 1.33 million tonnes in the week ended July 26. The dip in ARA fuel oil inventories came as one VLCC loaded a fuel oil cargo in the Rotterdam hub heading to Singapore. Compared with last year, ARA fuel oil inventories were 13 percent higher and above the five-year average of 943,000 tonnes for this time of the year.
The August 180 cst crack has strengthed to -$ 0.40 / bbl with the visco spread at $ 1.15 /bbl
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Nothing fresh to report on the same 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 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.