China's economy showing some signs of improvement
US crude oil inventories: The API reported yesterday that US crude oil inventories declined by 3.1MMbbls, which went against market expectations for a crude oil build of around 2.3MMbbls. It also reported a larger-than-expected draw in gasoline stocks of 3.56MMbbls, whilst distillate fuel oil stocks saw a surprise build of 2.33MMbbls. Persistent draws in recent weeks have been bullish for gasoline cracks, with the May RBOB crack rally well above US$20/bbl, from below US$13/bbl at the end of January. However, refinery utilisation rates should pick up moving forward, which should see a reversal in the large draws that we have seen on the product side recently.
Pernis refinery strike: Strike action at the Pernis oil refinery in the Netherlands continues, and union leaders say that operating rates at the refinery will be kept at 65%. There is no suggestion when the refinery will return to full operation, but workers at the 400Mbbls/d refinery have been on strike since last Monday. As of yet, the disruption has not provided too much support to the gasoil crack and it remains below US$14/bbl.
China data: Latest economic data out of China has been strong, with GDP recording steady growth of 6.4% in 1Q19 compared to expectations of around 6.3%, while industrial output was up 8.5% year-on-year in March compared to expectations of 5.6%. Retail sales also expanded by 8.7% in March, indicating improving consumer confidence. The better-than-expected economic data helps demand prospects; however some worries linger as to how Beijing will respond in terms of stimulus now that the economy is showing signs of improvement.
Metals production continues to increase at a healthy pace, with crude steel output up 10% YoY to total 80.3mt in March (cumulative output up 9.9% YoY to 231.1mt over the 1Q19) and primary aluminium output rising 3.4% YoY to 2.88mt (+3.9% YoY to 8.6mt over the first three months of the year).
Sugar refining cuts: Bloomberg reports that the Al Khaleej sugar refinery in Dubai has suspended operations once again, and this follows the 2.1mtpa refinery halting production from mid-December through to early February. Standalone refineries have been battling with a low whites premium- the Aug/Jul whites premium has traded to as low as US$51/t in April. The pressure is coming from a large exportable surplus of low quality white sugar from India, which is threatening to make its way onto the world market, along with Thai refined sugar.