Tag Archives: Crude Oil trading

Oil Continues to Fall in Asia

25 Jul

Oil futures traded modestly lower during Thursday’s Asian session, extending losses incurred during U.S. traded Wednesday.

On the New York Mercantile Exchange, light, sweet crude futures for September delivery fell 0.29% to USD105.29 per barrel in Asian trading Thursday despite some encouraging U.S. real estate data.

In U.S. economic news out Wednesday, the National Association of Home Builders/Wells Fargo builder sentiment index climbed to 57 this month from 51 last month. The July reading reading is the highest since January 2006. Readings above 50 indicate builders view the market as good.

New home sales advanced 8.3%, the best rate in five years. The seasonally adjusted rate was 497,000 units. Economists expected 484,000. May’s sales rate was also revised up to 459,000.

Even solid weekly inventories could not help oil higher in Asian Thursday. On Wednesday, the U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories fell by 2.8 million barrels in the week ending July 19, exceeding expectations for a decline of 2.4 million barrels.

Total U.S. crude oil inventories stood at 364.2 million barrels as of last week.

Traders appear to still be concerned about economic data out of China last night that serves as further proof manufacturing activity in the world’s second-largest economy is slowing. China’s HSBC manufacturing PMI fell to an 11-month low of 47.7 in July, from a final reading of 48.2 last month. Analysts had expected the index to rise to 48.6.

The U.S. and China are the world’s two largest oil consumers.

Elsewhere, Brent futures for September delivery fell 0.14% to USD106.91 per barrel.

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Three factors weighing on prompt month Crude Oil futures

18 May

Crude Oil refining margins remain lacklustre (weighed down by light product cracks in particular), with a few run cuts materialising in Europe. Refineries that have returned from maintenance are refraining from boosting utilisation rates, limiting the need to actively bid at the prompt.

—Asian refineries are at the height of their maintenance schedule, and with the prevailing compressed margins, Bank does not expect utilisation rates to surge as the maintenance season fades.

–A general reduction in non-OPEC shortfalls, with volumes from Sudan coming back, has helped relieve significant sources of stress in the supply system for now. However, other sources of geopolitical and technical challenges are emerging through the supply system.

The three factors mentioned above are weighing on the prompt month crude oil futures and should continue to do so, at least until the tail end of Q2; Barclays has noted in a report.

“At the prompt, we continue to see very few constructive elements across the demand-supply equation for crude oil. The OPEC basket price is also reflecting this weakness, briefly falling below the $100/bbl mark this week,” the bank report noted.

Overall, Barclays maintans its view that the short-term weakness in fundamentals is likely to fade as
the tail end of Q2 approaches.

On the demand side, the first indication to watch out for would be a recovery in petrochemicals in Asia.

However, such a pick-up is unlikely to be a straight line, in Barclays’ view. The naphtha market faces weight from oversupply and mild end-user consumption (in February and March, Chinese demand for the product fell by an average 3% y/y).

The supply side in Asia continues to be buoyed by incoming arbitrage volumes from Europe and the US on favourable east-west spreads. Around 1mt of heavy naphtha is expected to arrive in May for delivery in June (compared to typical flows of 0.6mt).

Compounding the weakness for naphtha cracks in the region, more supply is expected to come from Indian refiners as they boost exports as they emerge from maintenance season.

“The above factors will, in our view, be closely watched by other refineries in Asia as they emerge from maintenance, and a fair degree of tentativeness is likely to be exercised in boosting utilisation rates,” the Bank said.

“In our view, end-consumption for the olefins market (polyethylene, polypropylene, and styrenic resins) should pick up in June, buoyed by attractive prices and an improvement in manufacturing activity,” it added.

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