Asia oil/products: Crude holds gains, gasoline cracks turn negative

Quantum Commodity Intelligence - Asian crude oil markets closed higher Tuesday, following the global trend ahead of the keenly-anticipated OPEC+ meeting, while gasoline cracks fell to their lowest level since the early days of the Covid-19 pandemic.

Dubai cash for December delivery was assessed at $88.80/b for 5 October (1630 Singapore time), $0.55/b higher on the day, while Dec22 DME Oman futures were up $0.61/b at $88.82/b.

The likely OPEC+ cuts, flagged at a headline number of 1 to 1.5 million bpd, will fall predominantly on the Middle East since the vast majority of non-Middle East Gulf producers will still fall below target even with a reduced quota.

As such, the Dubai market structure and premiums for physical grades were seen edging higher with the M1/M3 spread (Dec22/Feb23) pegged at a near three-week high of $5.65/b on anticipated tighter prompt supplies.

Medium sour grades, including Oman, Upper Zakum and Al Shaheen, were heard offered at around Dubai swaps +$6/b for December, but spot activity remains subdued ahead of the Saudi OSPs.

ICE Brent futures for Dec22 were valued at $89.51/b at 1630pm Singapore, up $0.66/b from the previous Asia close. The Dec22 Brent/Dubai spread widened slightly to $0.71/b, while the Dec22 EFS was steady at around $6.35/b on the Asian market-on-close.

The distillate-rich Murban grade continued to trade at a comfortable premium to Brent with Dec22 futures on IFAD at $91.25/b on the close, although Murban partials were offered $90.95/b, valuing the grade around at $7.80/b over Dubai swaps.

Products

Naphtha refining margins fell to a two-week low on Tuesday, hit by firmer crude. The 2H November laycan was offered by Trafigura at $682/mt CFR Japan and was bid by BP at $679/mt without trading. For 2H December, Shell offered $674/mt without finding any buy-side interest. With that, moves in the paper market meant the outright price was unchanged day-on-day at $666.50/mt.

Gasoline cash markets were quiet, with a best-priced 92 RON cargo offer from Vitol heard at $86.60/b FOB Singapore during Tuesday's Asian trade. For higher octanes there were no new positions shown on either side of the market, which left spreads static. Paper was also quiet by recent standards, with moves in swaps leaving the 92 RON price down $2.36/b at $86.60/b. The spot and Q4 paper crack to Brent slumped back into negative territory, with spot cracks falling $2.93/b to -$2.75/b. That discount is its lowest since May 2020, according to Quanutm data.

The jet paper market saw a $0.90/b v $1.10/b bid/ask spread on the Oct/Nov without trading, while the November regrade to 10ppm was pegged at $7.20/b. With little fresh interest in the cash market, paper positioning led Tuesday's assessment as the spot price was steady at $114.21/b. The spot crack versus Brent was down $0.57/b at +$24.86/b.

Diesel saw another slow session in the cash market, which was not helped by holidays in China. Bids for 10ppm from BP lifted the cash curve at the front of the delivery window. Adding $0.51/b to Quantum's physical differential to take it to $3.26/b and the outright price was marked $2.47/b higher at $127.21/b. The spot crack to Brent was up another $1.90/b at a three-week high of +$37.86/b. The arb west is hovering close to its widest in six months.

A marine fuel 0.5% sulfur cargo loading 19-23 October at an $18/mt FOB Singapore premium to swaps was booked from Mercuria to Vitol, which confirmed where prevailing value sat in the low sulfur fuel oil market. Moves in paper, supported by firm distillates, helped to lift the outright price, which climbed $8.94/mt to $661.42/mt. The spot crack to Brent was up $0.73/b to +$6.51/b.

In the high sulfur fuel oil market, a cargo of 180 CST traded for loading 19-23 October at a $2/mt FOB Singapore discount to swaps, which weighed on the cash curve as it slumped $2.25/mt to $1.91/mt under swaps. On the outright, 180 CST was down $1.96/mt at $389/mt.  For 380 CST, a tight bid-ask spread was seen along the curve, with Quantum's assessment ticking a touch higher as it was marked up $0.10/mt at a $1.70/mt discount to swaps and left the outright price up $4.58/mt at $362.58/mt.