In the week of July 5- 9, market participants await OPEC+’s decision regarding its production plans for August and beyond, with spot market activity likely to remain tepid before the announcement. A recent market insight published on the Platts website briefly explains this.
August ICE Brent crude futures were pegged at $75.95/b at 0200 GMT July 5, 25 cents/b higher from the 0830 GMT Asian close on July 2.
Middle East Crude
- Activity over July 5-9 will focus on the issuance of official selling prices from Middle East producers such as Saudi Aramco and Qatar Petroleum as well as the outcome of the OPEC+ meeting regarding easing production cuts to add more crude supply to the market.
- Abu Dhabi National Oil Co. also issued its OSPs based on the Murban futures contract on the ICE Futures Abu Dhabi exchange. The price for Murban was set at $72.34/b. The August OSP differentials for Umm Lulu were set at parity to Murban, while the Das Blend differential was unchanged from July at 35 cents/b. The Upper Zakum differential was lowered by 10 cents/b to a 60-cent/b discount to Murban.
- Spot-buying activity for September-loading crude is likely to be strong as Asian demand remains robust, led by India, China, and Japan. However, increased outbreaks in Thailand and Indonesia could curb crude demand from these countries in the month ahead.
- Dubai cash-futures, or M1-M3, averaged $2.13/b in the week ended July 2, against $1.86/b in the week ended June 25. For the month of June, the Dubai cash-futures spread strengthened to average $1.88/b, up from $1.14/b in May.
- Reflecting bullish demand cues, September cash Dubai was assessed at a premium of $2.52/b on July 2, the highest since it was assessed at a premium of $2.56/b on Dec. 30, 2019.
- September-October spread was pegged lower mid-morning July 5 at 73 cents/b, down 1 cent/b from Asia close on July 2.
- September Brent-Dubai Exchange of Futures for Swaps was pegged at $4.07/b mid-morning July 5, down 10 cents/b from Asia close on July 2.
Asia Pacific Crude
- Market participants will look out for trading activity on the remaining August-loading program for Australian North West Shelf condensate, amid an oversupply of cargoes leading to a bearish market sentiment, despite recovering naphtha cracks.
- Traders will keep an eye out for tender activity from India’s OVL on Far East Russia’s Sokol crude for September loading, amid a wide Brent-Dubai EFS supporting cash premiums and market sentiment.
- Across the heavy sweet crude complex, tender activity for Sudan/South Sudan’s August loading Dar Blend are expected to emerge, and trading activity for August-loading Van Gogh crudes are expected to conclude this week.
- On regional OSPs, market participants await Indonesia’s June ICP this week.
Delivered Crude
- Market participants will evaluate whether cash premiums for US WTI Midland crude will maintain its upbeat momentum amid thinner buying activity heard from Asia and Europe.
- Traders will lookout for deals on Brazil’s Tupi crude to China as the October delivery cycle begins, following a dip in supply for September delivery barrels after a slew of trades concluded to Asia.
Crude Futures
- The market enters the July 5-9 week in limbo over OPEC+ production plans for August onwards. The producer group was set to agree on boosting collective crude output by 400,000 b/d each month from August to December and to extend their supply management agreement through the end of 2022, but the UAE stymied the proceedings by insisting on its baseline production, from which its quota is determined, should be raised.
- The OPEC+ is set to reconvene on July 5 at 3 pm Vienna time (1300 GMT) for further discussions. Failure to reach a consensus on the production plan for August onwards will see the alliance revert to its existing production agreement, under which output quotas will remain unchanged at July levels.
- Expectations of supply tightness amid rising demand continue to thrust oil prices higher. In the week ended July 2, the September contract for ICE Brent crude futures rose 1.05% on the week to settle at $76.17/b, whereas the August contract for NYMEX light sweet crude rose 1.50% to $75.16/b.
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Source: Platts
