Asia Crude Oil Market To Face Headwinds

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Oil prices are expected to face headwinds from weakening economic activity in the West and rising COVID-19 cases in the July 25-29 trading week, with investor attention to be focused on the US FOMC meeting over July 26-27, says an article published in S&P Global

ICE Brent

Front-month September ICE Brent crude futures stood at $102.44/b at 0230 GMT July 25, down 76 cents/b (0.74%) from the July 22 settlement.

Middle East crude

Trade activity for September-loading crude is expected to ease amid expectations of Asian buyers likely having completed their purchasing requirements this month.

Eyes will be on increased flows of US WTI Midland crude, which could further pressure prices for Murban.

Discussions on official selling prices for September will commence with another round of increases widely expected given the jump in the Middle East sour crude complex this month.

Dubai

Dubai cash/futures (M1/M3) averaged $9.60/b in the week ending July 22, against $9.34/b the week before.

Intermonth spreads were narrower in mid-morning trade July 25, with September/October pegged at $2.75/b, down 7 cents/b from the Asia close July 22.

September Brent/Dubai Exchange of Futures for Swaps was pegged at $10.52/b mid-morning July 25, down 6 cents/b from the Asia close July 22.

Asia-Pacific crude

Trading activity for September-loading barrels of Australia’s North West Shelf condensate will be closely watched this week amid expectations that cash differentials could be capped as naphtha cracks remains lukewarm.

Cash premiums for light sweet crudes including Australia’s Ichthys Field Condensate could be supported amid healthy middle distillate product cracks, however tepid gasoline cracks could limit the potential upside.

Sweet Crudes

For regional medium sweet crudes, market participants will look out for further spot trades across the Malaysia’s MCO crude basket following record levels seen for September-loading barrels of Labuan and Chim Sao crudes.

More details on September-loading barrels of regional heavy sweet crudes are expected to emerge this week.

The issuance of Brunei June official selling prices was expected this week.

Delivered crude

More volumes of WTI Midland could flow to Asia as differentials fall on the back of an SPR release and a wider NYMEX WTI/Brent spread.

Spot differentials for Asia-delivered barrels of Brazilian crudes could find support amid pockets of demand in South Korea.

Crude futures

COVID-19 concerns were weighing on sentiment amid a winter omicron wave in Australia and mounting COVID-19 cases in China.

Preliminary PMI data released late last week showed economic activity in the US and Eurozone falling sharply into contraction in June, in a sign that soaring energy prices and spillover effects from the Ukraine war were taking an increasingly heavy toll.

September Contract

The September contract for ICE Brent crude futures rose 2% week on week to settle at $103.20/b July 22, while the September contract for NYMEX light sweet crude edged up 0.1% to $94.70/b.

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Source: S&P Global

 

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