Wed 7Nov2018: ICE Gasoil jumps to $699 as Nov/Apr backwardation explodes to $29.25/mt. HO cracks also exploded on the higher side to $32.23/Brl while gasoline cracks were unchanged. EU situation on RME has gone out of control with spot premium now at +$662/mt while Q4 printing +585. FAME premium still showing no signs of follow through with Q1 at +150 and Q2 at +165. Argentinian made a strong presentation to EU commission on taking any additional measures on Biodiesel imports after last Sept de-registration – the commission is supposed to make a final ruling by end of Nov. On the US side, margin improved slightly together with HO values as Bean oil having a hard time to recover – Brazil is now considering an export tax regime like Argentina. OPEC now organising a timely meeting just after mid-terms to realign production – it would seem that coast is now clear for Brent to return to $80.

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Mon 5Nov2018: Gasoil sitting now on 200DMA @682 ahead of US midterms while Nov to April backwardation nearing $18/MT while RSI in low 50’s. Although Gasoline crack well below $10/brl, we note that Heating Oil crack remains at $29/brl enabling 3:2:1 to still print $14.90/Brl. US Biodiesel margins have improved only slightly thanks to improved RINs value at 36 cpg while BOHO has narrowed significantly with the engineered big drop in flat price of diesel ahead of elections in US. BOGO has improved at least $13/MT while EU premium, particularly in RME, show improvement beyond such consideration now trading spot close to +600 while Q4 still showing values of +485. FAME on the other hand is trading at 435 discount to RME in the spot and 325 discount for Q4. More meaningful is that the back of the curve on FAME is showing very depressed value for q1 at +150 which does not make any sense considering that even POGO has improved at least $50/MT in 2 weeks. On the FOREX side CNH has remained stable @6.91 despite the very acrimonious trade discussions. INR has stabilised after the big drop in crude these last 2 weeks before US elections. We can expect that post elections and Iran sanctions, there will be little to hold down crude prices.

Wed 24Oct2018: Gasoil breaks lower in line with Crude down to $695/Mt with backwardation to Nov/Apr widening again to $15.50/mt. RSI now back to a possible bounce levels at 55.85 but unlike Crude, gasoil has no broken the 200dma level. Crack margins for HO still at record high. US Biodiesel margins go even more negative despite improved BOHO levels but weak Biodiesel RINs value @32cpg still being pressured by the Ethanol RINs. IN EU RED RME goes to +505 in the spot market while Q4 offered at +435ish. RED FAME trading at 255 discount in Q4 while for Q1 2019, the spread is only 140 discount. Precipitation forecast for Europe looks a bit better for central and SouthEast Europe to improve Danube navigation but still rather dry to upper Rhineland. Brazil is bracing for decisive elections this coming week-end closing a bit weaker at 3.73R/$. China situation remains pretty much frozen at 6.94 while INR a bit improved at 73.36.

 

HO Crack:

 

Mon 22Oct2018: Gasoil moves a bit higher at $716 as backwardation to Apr19 widens to +$14/mt. Heat crack margin also moves higher to $28.45 telling us something is up as Nov WTI futures expires signalling end of a weakening trend. US Biodiesel still marred by poor margins despite increase in HO but D4 RINs following depressed state of ethanol RINs as impact of E15 weighs on market. 15 days to midterms that will set the tone for RVO (Renewable Volume Obligations) by end of Nov. In EU, situation with Rhine river causing logistical nightmare for supply chain of all refined products. RED RME spot has gone to +500 while Q4 offered at +405 and spread over RED FAME now 240/mt. Crop progress shows that we just went over the hump on Soya with 53% harvested; now storage for the remainder of this crop will be critical and would expect continued pressure on basis and then futures. BOGO ended today at -69/mt while POGO at -$161 and expect continued pressure on both despite exceptional arbitrage into EU. On the forex front, we are probably not too fare for CNH to reach 7 while Indian Rupee still vulnerable to Crude prices. In South America, the Brazilian Real is defying all expectations of emerging markets with a strong rebound to 3.67 ahead of elections next week end.

 

https://www.hellenicshippingnews.com/record-low-rhine-levels-bring-widespread-disruption-across-energy-and-commodities/

Fri 19Oct2018: Gasoil trends down to $712 with backwardation widening quite a bit for spot to almost $5/MT while x/j spread has widened $4/mt to $12.25/mt at the same time as Heating oil crack has exploded today to almost $28/Brl. Refiners are cracking for diesel as gasoline crack barely hovers $10/brl. No sign of increasing maintenance in US either meaning that margin are simply too attractive despite fact that both WTI and Brent crude have turned into a nearby spot contango and almost flat through April. In US Biodiesel, margins have disappeared as BOHO has narrowed close to 10 cents per gallon while D4 RINs remains at a paltry 32.5 cpg which is artificially depressed because of E15 and continued Trump administration assaults on RFS. In EU, as expected with strengthening BOGO, we are seeing premiums on FAME come back to +190 on the Spot and +165 for Q4. RME remains difficult to find at less than +235 premium Vs FAME for Q4. POGO has strengthened following moves by Indonesia to increase biodiesel blend but with continued weakness in Bean oil, difficult to see the light quite yet as only 47% of US Soy crop harvested. Yuan made a record low at 6.9411 and probably next stop is back to 7 while in India the rupee recovered to 73.33 late on Friday – the world now marches towards full Iran sanctions in 2 weeks.

Mon 15Oct2018: Gasoil retrenches to $715 despite lots of volatility and RSI stabilises around 61 after Hurricane damage assessment to Gulf platform practically nil while on-land damage much more serious but did not affect oil trend. However, geopolitical hurricanes are swirling-about and difficult to see how we can break $700 on downside despite Equity-market setback and Heating Oil crack at $25.95/Brl while Canadian crude being discounted heavily Vs WTI helping US refineries curtail imports. Maintenance season not suiting strong distillate demand +8.2% y-o-y, interestingly gasoline demand was -2.6% y-o-y. EU Biodiesel was pretty quite last week following the Argus London Biofuels conference where generally the mood was buoyant with increasing mandates across the board from 7 to 10% in EU under RED2 but a lot of anxiety remains over Argentina SME imports. It should be noted that Biodiesel demand has been strong all year in EU being led by Eastern Europe members who are playing catch up to meet existing biodiesel mandates. EU FAME showing +160 for Q4 still while RME showing +390 or a $230/MT premium difference – definitely a luxury fuel! Meanwhile in US, RINs should be well supported today as BOGO $10/MT stronger @-$55 while POGO follows -$155 as Indonesia pushes for higher domestic biodiesel blend to curtail distillate imports. China RMB remains weak at 6.93 while India Rupee is still under pressure at 73.80 as oil imports is stressing forex.

Wed 10Oct2018: Gasoil at $738.75 front month after a brief rally on Monday on account of Hurricane Michael – Traders now worried about Florida demand being cutoff and accumulating stocks of distillate with such strong Heat crack margin of now $27.20/Brl. Gasoil backwardation widening today a bit signalling that this may be a bear trap. In EU Biodiesel, RME premium now at +322 over ICE gasoil spot with a widening spread to FAME of 155-165. Crushers in Europe are crushing soy instead of rape because of high soymeal demand, this is creating a tight pipeline for rapeseed oil that maybe with us until the end of the year. In US biodiesel, diesel flat prices has improved production margin once again as RINs stable around 33cpg despite the drop in Ethanol RINs that will probably percolate to D4. The next milestone in US will be RVOs at end of November and talk is that EPA is unlikely to increase Biodiesel mandate to compensate Small Refinery Exemptions. CNH reaches 6.93 and INR 74.25 indicating continued $ strength but this also will increase domestic input costs & eventually hurt import volume in these huge Asian economies and any small GDP downticks will have big impact on rest of the world.

Mon 08Oct2018: Gasoil continues its consolidation dropping in early Asia trading another $10/MT to $735 with RSI still at a 66 so can see ICE dropping to low $700’s before its next move higher with backwardation already widening slightly in early trading in Asia for z18/j19. Heat Crack finished at $25.95/brl. Trump administration already announced its next move on RFS with its intention of raising ethanol blending limit to 15% – this will have a large impact on RINs for 2019 and will NOT lend support to Biodiesel D4 RINs. FAME premium in EU bounced back about $5/MT to +160 spot and +120 for Q4 with spread of RME at +150-160 over FAME. Looks like Brazil moving convincingly to the right with an almost outright win of the presidential candidate Bolsonaro in the first round. This should support the Real unless we see another surprise before the second round on Oct 28. Latin America will have to Fasten their seatbelts as Brazil economy is the elephant in the room and any volatility could signal another EM crisis.

Thur 4Oct2018: ICE Gasoil still well supported @$745/Mt front month and still showing $8.75 backwardation to April. Heat Crack margin widening still to $26.36/Brl as down-time season upon us and crude is building (EIA showing large crude build in past week) while product supplies will come down although we should remember that crude oil supplies in Cushing, OK are half of what they were last year. RSI on crude and even gasoil indicates we should break slightly for a consolidation prior to moving any higher, I think this break be short lived as geopolitical considerations. Biodiesel margins in US remain quite supportive even in the absence of BTC and despite low RINs at 34cpg – seems like everyone shipping to California where LCFS carbon credit making new high prices every day. Meanwhile in EU, FAME premiums remain under pressure falling to +110 for Q4 down $40/mt since Sep1 as winter demand falters while RME premiums are up $50/mt to +325. We should be almost 1/2 done with harvest by Monday but rains are slowing farmers down – watch for this inflection point – I usually look for 70% completion as gut-slot bottom on beans and would expect that to be earlier this year. Important to note that 57% of farmers (Farm Journal) are storing this harvest unpriced! This worries me as this means we could see long tail harvest pressure into 2019. Bean oil took a beating today, down almost 1% which is no surprise considering crushers in US still enjoying record crush margin at 1.50/bushels.

Mon 1Oct2018: Gasoil continues to move higher now at $740 as we are up 12% since mid-year while Heat Crack remains well above $25/brl and gasoil backwardation to Apr19 is $9/MT! FAME spot premium remains at +$50/mt over Q4 FAME while RME premium to FAME widening now to $157/mt over FAME for rest of Q4. Meanwhile in US, Heating Oil remains pretty flat throughout curve to Apr19 but Biodiesel crush margins bounced back strongly these last few sessions on account of flat price. Bean oil is having difficulty following the strong push of mineral oil as harvest in N.America is still ongoing at 30% while crush margins for beans is still a strong 1.42/bushels providing strong incentives for bean crushers. With confirmed high grain stocks, there is certainly no shortage of Bean oil in sight. NAFTA was finally resolved over the week-end although having little impact on Biodiesel but giving some hope to China trade talks, at least temporarily.