Asia oil/products: Crude extends losses, cracks still slump further

Quantum Commodity Intelligence – Asian crude oil prices extended the week's sharp losses Friday, although the selloff not enough to prevent further losses in product cracks. 

Front-month Dubai cash for December delivery was assessed $1.48/b lower at $84.82/b on 6 October for a fresh six-week low and a 10% weekly drop, while Dec23 DME Oman was down $1.50/b at $84.75/b.

After showing some resilience for most of the week, premiums for physical barrels were also in retreat, with medium-sour grades Oman, Upper Zakum and Al Shaheen all valued at Dubai swaps +$3/b, down around $0.30/b on the day and over $0.50/b on the week.

Saudi Aramco OSPs for November-loading crude to Asia came in at the lower end of expectations, although the slump in refining margins was likely factored in. Traders said most Asian refiners were still likely to go for full contractual volumes despite the higher OSPs and weaker margins, given November is a peak refining month.

For Aramco's key customer base in Asia, differentials for the flagship Arab Light grade were raised to Platts Dubai/DME Oman +$4/b for loading next month versus +$3.60/b on October cargoes.

ICE Brent futures for Dec23 were valued at $84.28b at the Asia close (1630 Singapore), down $1.61/b versus the previous Asia close. The Dec23 Brent/Dubai widened slightly to -$0.54/b while the Dec23 EFS eased to +$2.36-$2.40/b on the Asia close.

Products

The naphtha cargo market was quiet as cracks fell on Friday against flat Brent. No trades were seen in the physical CFR Japan market for the 12th consecutive day with 1H December offers falling another $10/mt to $649/mt versus bids at $647.5/mt. The backwardation with 2H December was unchanged at $1/mt. November cracks were largely stable on the day, up $0.05/mt to $36.84/mt, but the rest of the curve fell $1-4/mt. Quantum pegged the November outright $10.50/mt lower at $644.50/mt, the lowest level in nearly two months.

Gasoline margins widened for the second consecutive day despite weaker outright prices as Brent crude drifted sideways. November cracks were up $0.94/b to $4.40/b. Quantum assessed the November outright down $0.50/b to $87.30/mt. One physical trade for a mid-window 92 RON parcel in the FOB Singapore market was reported at $88.08/b FOB.

Jet fuel cracks continued to fall as the November swap was marked $1.91/b lower on the day at $22.15/b versus falling Brent futures. Time spreads also slumped, with the M1/M2 spread dropping $0.50/b to a two-month low of $1.35/b. The flat price was marked $3.80/b lower on the day at $107.04/b, with nothing heard in the physical market by the end of the day in Asia.

Gasoil swaps continued to fall as news emerged from Russia that it would relax its short-lived export ban. Following Europe lower, the November swap was marked $1.91/b lower on the day at $24.10/b versus frontline Brent futures even as crude was sold off, with the crack now at its lowest since mid-July. Time spreads also slumped, with the M1/M2 spread dropping $0.60/b to a two-month low of $2.25/b. The flat price was marked $4.09/b lower on the day at $110.54/b – a two-and-a-half-month low. In the physical market, a single deal was heard as BP sold Trafigura a 150kb parcel for delivery Oct 24-28 at a $2.20/b FOB Straits premium to the curve. Quantum's cash differential fell as a result, marked at $1.89/b.

Tight short-term supply of marine fuel 0.5% sulfur in Singapore helped to shield the market from the worst of the selloff seen across the rest of the global crude and products market, with the outright was marked $1.42/mt lower on the day at $612.18/mt. Despite the selloff in crude, however, cracks remain stubbornly close to the underlying as even a $1.12/b jump seen at the end of the week could only mark the spread at a three-week high of $1.67/b.

High sulfur fuel oil prices slipped further at the end of another torrid week for longs, although the pace of the selloff at least showed some sign of easing heading into the weekend. Flat prices were marked $2.30/mt lower on the day, taking losses for the week to 16% as the 380 CST outright was marked at $436.50/mt. Cracks managed to eke out more slim gains from recent lows as crude remained under pressure, with the November crack to Brent futures marked $0.97/b higher on the day at $13.96/b under. There was no new business heard in the cash market, where Quantum's differential remained marked at a $4/mt discount to paper.