Crude Oil
Concerns about supply disruption due to sanctions on Venezuela continued to push oil up yesterday. Brent crude oil futures gained 33 cents to settle at $61.65 a barrel, while WTI crude futures rose 92 cents to settle at $54.23 a barrel.
The fight to control Venezuela, which has the world’s largest oil reserves, has intensified with the new sanctions aimed at driving President Nicolas Maduro from power. The sanctions aim to freeze sale proceeds from PDVSA’s exports of roughly 500,000 barrels per day of crude to the United States.
Markets also gained support from the U.S. Fed discarding its promises of “further gradual increases” in interest rates and saying it would be “patient” before making any further moves
U.S. crude stockpiles rose by 1.1 million barrels last week compared with analysts’ expectations for an increase of 3.2 million barrels. While our material balance suggests a drop in crude stocks, we observe that the material balance showed a much higher build in crude stocks last week.
Gasoline stocks also fell after 8 straight weeks of build. The fall can be attributed to a hefty increase in demand of close to 700 KB.
Naphtha
The front month backwardation for Naphtha improved to $ 8.5 / MT yesterday, the highest since August 6, 2018.
Cargoes meant for March arrival in Asia from parts of Europe could be delayed due to bad weather. Middle Eastern exports to Asia were seen lower recently and this has also tightened supplies.
The Middle East’s January exports at 2.4-2.5 million tonnes were down from 2018’s monthly average of up to 2.8 million tonnes. Middle Eastern exports could remain under pressure due to refinery maintenance.
The February crack has improved further to -$ 5.85 /bbl.
Gasoline
Asia’s gasoline crack settled at a discount in excess of $ 3 /bbl on Wednesday. The glut in stocks is severely impacting not only gasoline prices, but naphtha prices as well.
Gasoline stocks in Fujairah burgeoned to a record high of 11.98 million barrels as per data collated by S&P Global. The latest data from Japan also showed its gasoline inventories were on the rise.
The February crack has jumped to -$ 1.05 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10ppm gasoil were at 34 cents a barrel to Singapore quotes on Wednesday, compared with a discount of 35 cents on Tuesday.
Cash discounts for jet fuel were at $1.55 a barrel to Singapore quotes, compared with a discount of $1.69 a barrel on Tuesday.
Bolstering sentiment in the aviation fuel market was a narrowing contango as the front month time spread slimmed to a discount of 57 cents a barrel, from 61 cents per barrel a day earlier.
Distillate stocks in Fujairah fell by 216 KB to 1.27 Million barrels. This is not far from the record low of 1.21 million barrels reported in early December 2018.
The February crack has dropped to $ 13.20 /bbl with the 10 ppm crack at $14.15 /bbl. The regrade is higher at $ 0.90 /bbl.
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Higher crude oil prices weighed on front month high sulphur fuel oil crack on Wednesday, dragging it away from its narrowest discount in two months hit in the previous session. However, fuel oil cracks were seen as holding firm given that current crude oil prices were buoyed by expectations of tightening supplies in the following month.
The February 380 cst barge crack against Brent crude was at minus $4.42 a barrel on Wednesday, compared with minus $4.26 a barrel in the previous session. The front month crack discount on Tuesday was its narrowest discount since Nov. 27, according to the data.
Stocks in Fujairah dropped by 265 KB to 8.15 million barrels.
The February 180 cst crack has eased to $ 1.00 / bbl with the visco spread at $ 0.40 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
Fuel Oil cracks continue to stay strong. ln the meanwhile, strong buying in Cal 20 cracks has pushed the Jet crack close to $ 20 / bbl. We shall wait for that number to be crossed before laying on the next tranche.
The Cal 20 distillate cracks have risen as well. We will hedge Jet at levels in excess of $ 20 /bbl.
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.