Asia oil/products: Crude higher, gasoline, diesel cracks extend rally

Quantum Commodity Intelligence – Middle East crude oil prices consolidated the week's second-half rebound Friday, registering the second-highest print since April, while gasoline and diesel cracks led the way for refining margins.

Dubai cash for September delivery was assessed at $81.74/b for 21 July at the Asia close (1630 Singapore), up $0.69/b, while Sep23 DME Oman futures were up $0.58/b at $81.65/b.

The improvement in refining margins has boosted physical premiums as refiners chase down spot barrels, already with an eye on the key Q4 period. Premiums for medium sour grades, including Oman, Upper Zakum and Al Shaheen, were pegged at Dubai swaps +$1.70-1.90/b, while sellers of the lighter Murban grade were looking for above Dubai swaps +$2/b.

Activity in the Dubai partials window has also been steadily picking up with another convergence taking the month's total to five, made up of two Dubai, two Upper Zakum and one Oman cargo.

ICE Brent futures for Sep23 were assessed $80.23/b at 1630 Singapore, up $0.43/b from the previous Asia close, yet again widening the Sep23 Brent/Dubai spread to around -$1.50/b. The notional Sep23 EFS was pegged at $0.20-$0.25/b on the Asia market close, while Oct23 was trading around $0.70/b.  

Products

There was plenty of interest on show in the naphtha cargo market, with a best offer for the 2H Sep laycan at $601/mt CFR Japan and for 1H Oct at $603/mt. Contango in the paper market showed tentative signs of easing back towards a flatter structure, with that helping to leave the outright $3.25/mt higher on the day at $598.75/mt. Cracks also were a touch higher, marked up $0.76/mt on the day at a six-week high of +$11.91/mt.

Gasoline cargoes remained in demand, with Unipec bidding for 92 RON parcels along the curve. One of those was hit by PTT, which sold 50kb for Aug 9-13 delivery at $97.20/b FOB Straits. That put some upwards pressure on cash versus swaps, with Quantum's 92 RON flat price assessed $0.79/b higher at $97.21/b. The spot crack to Brent futures pushed to a fresh three-month high as it gained another $0.45/b to +$17.15/b.

Asian diesel refining margins extended a four-month high in trade on Friday, with paper cracks rising for the fifth straight day. September cracks versus Brent rose $1/b to almost $23/b, up $5/b in a week where the EFS rose, indicating it is Asia that is tightening rather than European demand pulling barrels west. Timespreads are rising, with M1/M2 reaching $1.15/b on Friday, double in a week. Analysts expect Middle Eastern volumes to be diverted to the region and Chinese exports to rise, but that has been predicted for a week now, and cracks remain firm. In the physical markets, there are bids for 150,000 barrels at $1.30/b, indicating an expected tightness in the market.

Jet cash differentials also rose on Friday, with bids seen at $0.30/b over swaps. The regrade widened to $1.80/b over the week from $1.50/b, but that is linked to tight diesel as opposed to weak jet demand. Indeed the M1/M2 spread rose from $0.25/b last week to $0.65/b on Friday.

Marine fuel 0.5% sulfur remained under pressure, with structure at the front of the paper curve flattening. Cargo prices were also under pressure, with a deal in the open market heard from Shell to Chevron at a $2/mt FOB Straits discount to the curve and delivered Aug 16-20. That was taken as value, with Quantum's cash differential eased down another $0.13/mt. Those moves left the outright up $6.54/mt on the day at $552.92/mt, with the spot crack to Brent futures eking out a $0.60/b rise to flip barely back into positive territory at $0.07/b.

High sulfur fuel oil cargoes went another day without trading, with high prices seeming to deter most buyers from showing their hand in the market. A single bid was heard for a 180 CST parcel delivered at the front end of the cash curve, a value that pushed Quantum's cash assessment up $0.12/mt on the day to $8.12/mt. The August visco spread traded at $6.50/mt, helping to mark outright value in the 180 CST market that was up $6.68/mt at $484.01/mt and 380 CST up $5.67/mt at $482.52/mt. With crude edging up, the spot crack versus Brent futures pushed to a fresh high, gaining $0.56/b on the day to a 15-month high of -$4.07/b. The 380 CST east-west was up another $1.50/mt as it touched a six-week high of $12.50/mt.