Crude Oil
Oil prices rose about 2% to a two-week high on Tuesday on optimism that the Fed rate cut will happen. Brent crude rose $ 1.01 to settle at $63.72 a barrel. WTI crude futures gained $ 1.18 to settle at $58.05 a barrel.
Both contracts have risen for four days in a row to their highest closes since July 15. For the month, however, both contracts were still set to decline due to lingering worries about oil demand with Brent down over 2% and WTI down less than 1%.
U.S. central bankers began their two-day meeting on Tuesday and were expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago. U.S. President Donald Trump called on the Federal Reserve to make a large interest rate cut.
U.S. and Chinese negotiators also meet this week for their first in-person talks since agreeing to a truce to their trade dispute at a Group of 20 meeting last month. However, expectations for progress during the two-day Shanghai meeting are low, so officials and businesses hope Washington and Beijing can at least detail commitments for “goodwill” gestures and clear the path for future negotiations. Trump warned China against waiting out his first term in office to finalize any trade deal, saying if he wins re-election in the November 2020 U.S. presidential contest, the outcome could be no agreement or a worse one.
China’s factory activity shrank for the third straight month in July. The official PMI was at 49.7 in July (forecast of 49.6), slightly higher than 49.4 in June, underlining the need for more stimulus to support an economy hit hard by the bruising trade war with the US.
api data
The API reported a huge draw of 6.03 million barrels last week. Gasoline and Distillate stocks also drew making the data truly bullish.
However, it may be noted that API reported production at 11.3 mb/d which is what the DOE had reported last week. This would imply that the shut in production from the previous week has not yet come back on stream. If that is the case, this draw is more about US assets to get back on stream rather than a structural shortfall in supply.
Naphtha
Asia’s naphtha crack was marginally higher by 4 cents to $29.82 a tonne on Tuesday, highest since July 22 supported by a string of recent demand.
The August crack is higher at -$ 6.05 /bbl
Gasoline
Asia’s gasoline crack hit a three-session low of $5.41 a barrel on ample supplies.
The August crack is higher at $ 7.05 / bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash premiums for 10 ppm gasoil rose to 23 cents a barrel to Singapore quotes on Tuesday, up from 21 cents per barrel a day earlier.
The August/September time spread was at a premium of 38 cents a barrel on Tuesday. The front-month spread was at 40 cents per barrel in the previous session, the widest since end-October last year. I
Cash premiums for jet fuel climbed to 38 cents a barrel to Singapore quotes on Tuesday, up from Monday’s 36 cents per barrel.
The August crack for 500 ppm Gasoil is higher at $ 16.40 /bbl with the 10 ppm crack at $ 17.10 / bbl. The regrade is at +$ 0.10 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Cash premiums for Asia’s 180-cst and 380-cst fuel oil grades fell on Tuesday amid lower supplier offers, and weaker deal values in the Singapore trading window weighed on spot premiums of the fuel.
The 180-cst HSFO cash premium fell to a two-week low of $16.20 a tonne to Singapore quotes on Tuesday. The 380-cst HSFO cash premium slipped to a two-session low of $19.53 a tonne to Singapore quotes, down from $20.96 a tonne in the previous session.
The weaker values for 180-cst HSFO relative to 380-cst HSFO prices also helped narrow the front-month viscosity spread. The August viscosity spread rose to a near-two week low of $9.50 per tonne, down from $9.75 a tonne in the previous session.
The August 180 cst crack has jumped to + $ 3.65 / bbl with the visco spread at $ 1.60 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
While there is a temptation to hedge more of August FO crack, we will refrain given that it starts settling from tomorrow. We will examine the September FO crack closer to flat for hedging. We will also consider hedging the Cal 20 10 ppm Gasoil crack above $ 19 / 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.