Asia Crude Oil: Key Market Indicators This Week

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Trade activity in the Asian crude oil market is likely to pick up pace for August-loading barrels amid a strong market sentiment, which remains largely supported by brightening demand cues as COVID-19 cases decline in key demand centers such as India, reports Platts.

August ICE Brent crude futures were pegged at $72.96/b at 0230 GMT June 14, 27 cents/b higher from the 0830 GMT Asian close on June 11.

Middle East crude

  • The week ahead is likely to see an uptick in trade for August-loading crude through spot tenders by Middle East producers and Asian refiners.
  • Eyes will be on the issuance of Qatar Petroleum’s Al-Shaheen tender this week with cash premiums in the tender expected to be higher than previous months given the stronger demand cues emerging from Asia.
  • Along with China, India’s crude demand will also be keenly watched by market participants. The country continues to make a steady recovery from the second wave of COVID-19 with increased mobility across cities leading to greater demand for crude and oil products.
  • Last week, the official selling price cycle for the month was completed as Qatar Petroleum and Iraq’s SOMO issued OSPs for their respective crude grades.
  • Indian Oil Corp. issued a tender seeking sweet crude for loading in August and was heard to have bought 5 million barrels of Nigerian crude. The crude was heard bought from oil majors Total, Chevron and Exxon but the information could not be immediately confirmed.
  • Dubai cash/futures (M1/M3) averaged $1.81/b in the week ended June 11, against $1.51/b in the week ended June 4. On June 11, August cash Dubai was assessed at a premium of $1.96/b to same-month Dubai futures, the highest since Jan. 24, 2020, when it was assessed at a premium of $2.01/b.
  • Inter-month spreads were higher during mid-morning trade June 14 with August/September pegged at 66 cents/b, up 4 cents/b from the Asia close June 11.
  • August Brent/Dubai Exchange of Futures for Swaps was pegged at $3.44/b mid-morning June 14, unchanged from the Asia close June 11

Asia-Pacific crude

  •  Market participants will be looking out for trading activity involving Australia’s North West Shelf condensate following the emergence of its loading program last week, as well as the potential demand from key buyer Indonesia’s Pertamina to support condensate sentiment.
  • On Qatari condensates, tenders for August-loading barrels of Qatar’s DFC and LSC will close this week and traders will be monitoring any pre-tender trades amid a widening Brent/Dubai EFS and stronger demand from Northeast Asian refineries post the turnaround season.
  • The August-loading program for Australia’s Cossack and Ichthys condensate, as well as Papua New Guinea’s Kutubu Blend will remain in focus this week.
  • For Far East Russian crude, traders will be keeping a lookout for India’s OVL’s Sokol tender to emerge this week. Cash differentials for August-loading Sokol crude could remain resilient amid a wide Brent/Dubai EFS.
  • Traders will also be watching out for the August-loading program for Malaysian crude, as well as results for Vietnam’s PetroVietnam Oil and Brunei Energy’s Kimanis crude tenders. Cash differentials for August-loading regional grades are expected to remain stable or even an inch lower on an uptick in supply for Vietnamese crude and poor regional demand amid COVID-19.
  • Traders will look to ascertain the tender results for Sudan/South Sudan’s July-loading Nile Blend, where cash premiums could head south amid sluggish fuel oil cracks.
  • Looking at regional official selling prices (OSPs), market participants will await clarity on Brunei’s March/April OSP this week.

Delivered crude

  • Market participants will be keeping a lookout for trades of September-arrival Brazil Tupi crude to Asia, although producers have concluded most of the deals to US and European markets for better margins.
  • Traders will be looking out for fresh tenders from Thailand’s PTT and Taiwan’s CPC Corp. for September-delivery sweet crude. The US’ WTI Midland crude, a favorite among these refiners, could likely face competition from regional crude amid a narrow Brent-WTI spread.

Crude futures

  •  Front-month ICE Brent crude futures are likely to continue trading above the $72/b support level this week, as the market remains buoyed by increasing expectations of supply tightness in the second half of 2021.
  • A bright demand outlook, led by the easing of restrictions in the Western Hemisphere, remains an integral pillar of support for the market. Furthermore, declining coronavirus cases in key Asian economies, especially India, are increasing optimism surrounding demand recovery in Asia.
  • However, supply-side uncertainty lingers as OPEC is yet to provide guidance on production quotas from August onward.
  • Eyes are also on US-Iran nuclear talks that continued over the weekend, which could eventually lift sanctions on Iranian crude exports. US Secretary of State Antony Blinken said on June 8 that even if a return to compliance with the Joint Comprehensive Plan of Action is reached, sanctions on Iran may not immediately be lifted.
  • Crude oil futures rose during the week ended June 11. The front-month contract for Brent ended the week 1.11% higher at $72.69/b, the highest since April 30, 2019. The front-month contract for NYMEX light sweet crude ended the week 1.85% higher at $70.91/b, the highest since Oct. 16, 2018.

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Source: Platts