Asia oil/products: Crude higher, but distillate cracks make headway

Quantum Commodity Intelligence - Crude prices in Asia Wednesday were higher for a second session, while key products outstripped the rise in crude to leave cracks mostly higher.

Dubai cash for February delivery was assessed at $76.70/b for 21 December (1630 Singapore time), up $0.96/b on the session, while Feb23 DME Oman futures were also $0.95/b higher at $77.17/b.

Another lively Dubai partials window saw a sixth convergence of the month as Unipec nominated Upper Zakum to Glencore. This valued the grade at around Dubai swaps +$1.45/b, with spot demand still sluggish. Al Shaheen was pegged at parity to UZ, while Oman was seen around $0.40/b above the Adnoc grade.

Medium sour grades continue to face stiff competition from discounted Russian Urals heading to Asia, with India now the top buyer of the heavily-sanctioned Russian grade.

On the lighter grades, cash Murban was assessed at $79.60/b, a premium of $2.90/b over cash Dubai, making it still a viable delivery option against Dubai partials convergence once the quality premium of $2.82/b is factored in.

ICE Brent futures for Feb23 were assessed $80.07/b at 1630pm Singapore, up $0.89/b from the previous close, while the Feb23 Brent/Dubai eased slightly to +$3.37/b. The Feb23 EFS also narrowed by around $0.15/b, valued $4.80-$4.85/b on the Asia market close.

Products

Naphtha cracks tracked crude for the fourth straight day in a row. Bids for 2H Feb delivery were seen at $624/mt versus an offer of $2/mt higher. Quantum assessed at $625.50/mt CIF Japan. The market remains in slight backwardation in Asia versus steep physical discounts in Europe as the festive season and an economic slowdown pushes physical values almost $20/mt below front month swaps.

Gasoline lent some support to naphtha on Tuesday with Europe's spike in cracks filtering into the east of Suez market. Swaps firmed more than $1/b against crude and the Q1 crack versus Brent rose to $3.83/b for 92 RON. The market structure flattened slightly, with the cash differential falling $0.24/b to $1.06/b, giving a flat price of $85.54/b FOB Singapore, up almost $2/b on the day at 1630 Singapore time. 92 RON cargoes were offered at $85.10/b for prompt loading and $86.10/b for later dates in mid-January.

Jet physical cargoes saw little activity again, but swaps rose $3/b on the day to outpace a $1/b rise in crude. The cash differential was assessed unchanged at $0.50/b to $110.54/b FOB Singapore. The rise was due to lower than expected supply of diesel in Asia. The east-west, as a result, narrowed, leaving arb economics worse.

10ppm cargoes were bid at a cash differential of $1.85/b and offered at $2/b, albeit for different loading dates. That pushed the cash differential up $0.41/b to $1.71/b over swaps, giving a flat price of $113.56/b, up $2.36/b on the day when crude rose by just $1/b by the cash market close. As a result, the backwardation is steepening.

Marine fuel 0.5% sulfur saw a wide bid-ask spread persist along the curve in the cash market, with no deals booked by the end of Asia's trading session. Quantum's differential was steady at a $14.44/mt FOB premium to the curve, with the outright price easing $1.47/mt day-on-day to $559.42/mt. That left refining margins lower as its recent recovery unwound, with the spot crack versus Brent dropping $1.15/b to $0.43/b. Data from Fujairah showed an 18% fall in residual stocks last week to a six-month low of 10.5 million barrels.

The high sulfur fuel oil market rebounded as the swaps curve was bid up through Wednesday's session. In the cash market, PetroChina and Traifgura were looking for 380 CST at a $4/mt FOB Straits premium to paper without a deal being struck. That left the outright marked $18.40/mt higher day-on-day at $365.32/mt.