Crude oil futures are expected to climb this week Jan. 3-7 as COVID-19 concerns ease and amid positive sentiment from last week’s Santa Claus rally, which is expected to carrying over into the new year, says an article published in Platts.
ICE March Brent crude futures stood at $78.15/b at 0200 GMT Jan. 3, up 37 cents/b, or 0.48%, from the Dec. 31 settlement.
Middle East Crude
The Middle East crude market will focus on the upcoming OPEC+ meet on Jan. 4 and the issuance of official selling prices, or OSPs, for February by Middle East producers, lead by Saudi Aramco.
Market participants expect OPEC+ to continue unwinding production cuts by 400,000 b/d in February, as demand cues remain largely resilient despite rising COVID-19 cases across many economies.
OSPs for February are expected to be cut in line with the drop in the sour complex structure through December. However, most traders expect the cut to not reflect the full extent of the drop in structure amid relatively steady demand cues. The Dubai cash-futures spread, a measure of the market structure, narrowed to average $1.52/b in December, from $3.38/b in November.
Dubai cash-futures, or M1-M3, averaged 85 cents/b in the week ended Dec. 31, against $1.38/b in the week ended Dec. 24.
Intermonth spreads were narrower during mid-morning trade Jan. 3 with March-April pegged at 49 cents/b, down 2 cents/b from the Asia close Dec. 31.
March Brent-Dubai Exchange of Futures for Swaps was pegged at $3.21/b mid-morning Jan. 3, down from $3.27/b from the Asia close Dec. 31.
Asia Pacific Crude
Trading activity in the Asia Pacific sweet crude market is expected to remain thin into the last week of the February loading cycle, with most end-users having already fulfilled their procurement requirements.
Fresh trading of Far East Russian grades has commenced, with market participants awaiting tenders for March loading Sokol crude.
Across the light sweet crude complex, trading activity for Australia’s February loading Cossack is anticipated.
For regional crudes, market participants will look out for spot deals on Malaysia’s Miri and Kikeh crudes, following an influx of US and arbitrage grades into Asia.
On heavy sweet crudes, trading activity for February-loading Australian heavy sweet crudes such as Vincent and Van Gogh are expected to emerge this week.
On OSPs, traders await Malaysia’s December MCO OSP, Indonesia’s December ICP and Brunei’s November OSP this week.
Delivered Crude
Arbitrage flow of US’ WTI Midland crude into Asia could remain robust amid a wider on the month WTI-Brent spread.
Trading activity for April delivery cargoes of Brazil’s Tupi crude is expected to kick off following clarity on release of Chinese import quotas.
Crude Futures
Concerns remain over surge in COVID-19 caseloads in the US and some parts of Europe. On the bright side, hospitalizations and deaths have not risen as much as in previous waves, giving governments less impetus to resort to the same extreme lockdowns seen at the start of the pandemic.
In the week ended Dec. 31, the international crude oil benchmarks had risen, with March contract for ICE Brent futures up 2.6% on the week to settle at $77.78/b, while February contract for NYMEX light sweet crude was 1.9% higher at $75.21/b.
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Source: Platts
