Asia oil/products: Crude extends losses, HSFO keeps falling further

Quantum Commodity Intelligence – Asian crude prices dropped for a third consecutive session Tuesday following the broader risk-off trend across oil markets, although that fall was not enough to prevent HSFO prices from slumping further amid rising supply.

Front-month Dubai cash for December delivery was assessed $2.01/b lower at $91.10/b for 3 October, while Dec23 DME Oman was down $1.99 at $91.01/b.

Premiums for December also eased back with flagship medium sour grades Oman, Upper Zakum and Al Shaheen heard in the Dubai swaps +$3.35-$3.45/b range but still close to yearly highs.

Market structure was also slipping from last week's 2023 highs as the key M1/M3 spread (Dec23/Feb23) narrowed to around +$3.35/b, while the one-year curve lost $1/b in value to close at $10/b.

The OPEC+ JMMC meets Wednesday and the lower prices over the past few sessions make it highly unlikely the technical committee will recommend a relaxation in the current production cuts, while the core OPEC group remains broadly upbeat on the demand outlook.

The softer tone of the last few sessions is not expected to impact Saudi Arabia's OSP plans, with November Arab light expected to be hiked from the current +$3.60 versus the Oman/Dubai average. Sources said the OSPs are likely to be published on Thursday.

ICE Brent futures for Dec23 were valued at $90.51/b at the Asia close (1630 Singapore), down $2.02/b versus the previous Asia close. The Dec23 Brent/Dubai was steady at -$0.60/b while the Dec23 EFS eased back to around +$2.75/b on the Asia close.

Products

Naphtha margins further widened on Tuesday amid a weaker crude oil market. November cracks gained $1.83/mt on the day to $34.10/mt, the widest in a week. The curve flattened with the November/December spread down $0.25/mt to $4/mt. Sellers in the CFR Japan naphtha market lowered their offers sharply to bridge the gap with bids, which stayed largely steady on the day. The most competitive offer for H2 December cargo fell $17/mt from yesterday to $690/mt, but was still $5/mt above the highest bid at $684/mt, down $3/mt on the day. Offers for H1 cargo also dropped $17/mt to $692/mt. That sent spot outright price $8.75/mt lower to $686/mt, but cash differentials rose $2/mt to $4/mt.

The gasoline physical market continued to face bearish pressure as crude oil prices dropped, with one FOB Singapore back-end 50kb parcel traded at $93.80/b, down roughly $0.50/b since yesterday. Quantum pegged the November outright price down $0.80/b at $92.80/b on the back of the lower trade. There was a flurry of bids and offers for 92 RON with PTT, Trafigura, and BP heard on the sell side, offering $94-$94.40/b. Buyers targeted large parcels of 100-150kb, with bids seen around $93.70/b. For 95 RON, offers for the back end were reported at $100.30/b, but there were no bids to counter. Cracks rose slightly, with November up $0.95/b to $3.83/b. The intermonth spread at the front of the curve narrowed $0.15/b to $0.85/b.

It was another slow session in the jet fuel cargo market, with few fresh positions on show. Broker indications moved the cash differential down $0.32/b, but with no trade to go on it was mainly moves in the paper market that moved the assessment on Tuesday. That spot price was $4.11/b lower on the day at a one-month low of $118.78/b, with the November crack to Brent futures down $1.90/b at $26.98/b. The November regrade widened $0.35/b to $3/b. Backwardation eased off, with intermonth spreads weakening at the front of the curve as M1/M2 was marked $0.60/b lower on the day at $2.30/b.

Gasoil cracks eased off despite crude falling, with concerns about the health of global demand weighing on the market and leaving November paper down $1.55/b on the day at $29.98/b. Business picked up in the 10ppm cargo market, with BP selling a 214kb parcel to Unipec at a $3/b FOB Straits premium to the curve and another 168kb to Vitol for similar delivery dates at a $2.40/b premium. Quantum's cash differential was marked $0.16/b lower on the day at $2.84/b, with moves in the underlying paper giving an outright that was down $4.16/b on the day at $124.71/b.

Marine fuel 0.5% sulfur cash differentials continued to rise amid firm buying interest, with another three deals heard in the open market on Tuesday before the close of business in Asia. Cargoes traded along the curve at a $16-$18/mt FOB Straits premium to paper and cash differentials were marked higher for the fifth session in a row as the assessment rose $0.73/mt to $16.74/mt. The outright was down $5.46/mt on the day at $656.67/mt, but the Hi5 still rallied to an eight-month high as HSFO slumped again as the spread hit $180.50/mt.

High sulfur fuel oil continued to weaken amid strong selling pressure, with plenty of sellers in the paper market. There was no new business heard in the cargo market, but 380 CST outright prices were marked $25.01/mt lower on the day at a two-and-a-half-month low of $476.20/mt. Cracks continued their recent slump, with the November paper hitting a $15.39/b discount to Brent futures. Backwardation also flattened, with the M1/M2 spread down another $2.25/mt at just $3.50/mt – its thinnest since the start of summer.