Crude Oil
Oil prices fell almost 4% to their lowest in over two months as a smaller-than-expected decline in U.S. crude inventories enhanced fears of a global economic slowdown due to the U.S.-China trade war. Brent futures fell $2.58 to settle at $66.87 a barrel. WTI futures dropped $2.22 to close at $56.59 a barrel
Yesterday’s settles were the lowest closes for Brent since March 12 and WTI since March 8. For the month, Brent is on track to fall about 8% and WTI around 11%, which would be the first monthly decline for both contracts in five months. The premium of Brent over WTI, meanwhile, fell to around $10 per barrel, down from a more than four-year high of $11.59 on Wednesday.
China’s factory activity shrank more than expected in May, an official survey showed on Friday, heaping pressure on Beijing to roll out more stimulus to support an economy hit by a bruising trade war with the United States. The official Purchasing Managers’ Index (PMI) fell to 49.4 in May from 50.1 in April, data from the statistics bureau showed.
Arab leaders gather in Saudi Arabia on Thursday for emergency summits that Riyadh hopes will deliver a strong message to Iran that regional powers will defend their interests against any threat following attacks on Gulf oil assets this month.
Iranian May crude exports dropped to less than half of April levels at around 400 kbpd after the United States tightened sanctions on Tehran’s main source of income. Iran needs to export at least 1.5-2.0 million bpd of crude to balance its books.
The crude draw of around 300 KB last week was not only less than the 900 KB decline analysts forecast in a Reuters poll but also well below the 5.3 million-barrel drawdown reported by the API reported late Wednesday.
The decline last week reduced crude stocks from their highest since July 2017 seen the previous week, but at 476.5 million barrels, they were still about 5% above the five-year average for this time of year.
The gasoline build would have come as a surprise to the market in light of the Memorial Day holiday but can possibly be explained by the shutdown due to flooding.
The material balance statement, though, suggests significant draws across the board. Demand figures for products are strong and that is supportive of the market.
Naphtha
Asia’s naphtha crack fell for the second day to reach $11.08 a tonne, the lowest since March 5 as ample supplies weighed despite demand seen this week.
Taiwan’s Formosa Petrochemical, also Asia’s top naphtha importer, was looking to buy open-specification grade fuel for first-half July arrival at Mailiao. This comes a day after South Korea’s SK Energy bought heavy full-range naphtha for the same arrival period at premiums in the high single-digit a tonne level to Japan quotes on a cost-and-freight (C&F) basis.
The June crack is lower at – $7.05 /bbl;
Gasoline
No fresh news on the gasoline markets. Light distillate stocks in Singapore fell by 254 Kb to 11.25 million barrels.
The June crack is higher at $ 4.80 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash discounts for 10ppm gasoil narrowed to 2 cents a barrel to Singapore quotes, against a 3 cent discount on Wednesday.
Backed by a firmer deal in the physical market, cash discounts for jet fuel narrowed to 19 cents a barrel to Singapore quotes on Thursday, compared with a discount of 33 cents per barrel a day earlier.
Air freight demand in the region has taken a beating amid the trade tensions between China and the United States, but traders were hopeful summer travelling demand in terms of passenger traffic would boost the market in the short term.
Asia-Pacific airlines posted a 2.9% increase in April passenger demand, up from 2% growth in March but well below the long-term average, the International Air Transport Association (IATA) said on Wednesday.
Middle Distillate Stocks in Singapore rose by 159 KB to 2.48 million barrels.
The June crack for 500 ppm Gasoil is higher at $ 13.80 /bbl with the 10 ppm crack at $ 14.50 / bbl. The regrade is at -$ 0.15 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
Asia’s front-month time spread firmed on Thursday, pushing higher after some losses earlier this week. The June/July 380-cst time spread was trading as high as $ 3.45 a tonne on Thursday.
The front-month time spread was at $2.75 a tonne in the previous session and was last higher on May 2 at $4.50 a tonne.
Singapore fuel oil inventories fell 3% to a seven-week low 21.05 million barrels in the week ended May 29.
The June180 cst crack is higher at – $ 1.65 / bbl with the visco spread at $ 2.00 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The strengthening of the fuel oil market reflects the bullish undercurrent of the market. We will continue to look for opportunities to hedge at opportune moments.
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.