Asia oil/products: Crude in retreat, demand drives gasoline crack up

Quantum Commodity Intelligence – Middle East crude markets Tuesday were under pressure, falling to one-week lows, while in the products market the gasoline crack found some strength as the US summer driving season gets underway.

Dubai cash for July delivery was assessed at $74.93/b for 30 May at the Asia close (1630 Singapore), down $1.32/b, while Jul23 DME Oman futures were $1.58/b lower at $74.12/b heading into the expiry.

The Dubai partials window saw a 16th convergence of the month, this time an Upper Zakum cargo nominated. The last traded Dubai partial of $74.93/b valued UZ, Oman and Al Shaheen at Dubai swaps plus around $0.65-$0.75/b, again hovering at near two-year lows.

The slump in spot premiums is likely to lead to a sharp reduction in Middle East OSPs with traders expecting at least a $0.50/b reduction on flagship Saudi Light.    

The key M1/M3 Dubai cash spread, closely monitored by Saudi Aramco and other Middle East National Oil Companies (NOCs), has averaged $1.07/b so far in May compared to $1.78/b in April, which could prompt even deeper cuts.

ICE Brent futures for Jul23 were assessed $76.08/b at 1630 Singapore, down $1.30/b from the previous Asia close. The Jul23 Brent/Dubai edged up to $1.15/b, while Aug23 also nudged up to $1.60/b. The Aug23 EFS was flat at around $2.25/b on the Asia market close.

Products

Interest in the naphtha cargo market persisted as another deal was heard during Tuesday's trading session, with BP booking a parcel for the 1H August laycan at $589/mt CFR Japan. Taken as value in the middle of Quantum's assessment period, moves in another relatively quiet session for the paper trade left the outright down $11/mt on the day at $588.75/mt. The spot crack to Brent eased off slightly, marked $1.91/mt lower for June at +$34.89/mt. The east-west continued to narrow, with the June spread down another $1/mt at a six-week low of $10.50/mt.

There was a single trade heard in the gasoline cargo market as Unipec sold a 50kb June 25-29 delivery 92 RON parcel to Total at $87.30/b FOB Straits. Taken as value at the back end of the cash curve, the differential to paper jumped and left the 92 RON outright up $0.24/b lower on the day at $87.55/b. The June crack versus Brent futures was up $1.05/b at +$11.40/b, unwinding half of the losses seen over the past week in a single session.

It was another quiet session in the Asian jet fuel market, with no fresh positions on show for cargoes during Tuesday's session. Paper markets were also slow, with the sole activity of note a trade for the June regrade at -$1.32/b as Aramco sold to Dare. With the cargo differential held at a $0.05/b discount to paper, the outright moved $1.33/b lower on the day to $88.07/b while the June crack to Brent futures was steady as it was marked down $0.06/b at +$11.96/b.

Trade interest in the gasoil market was limited, with only a few deals heard in the 10ppm diesel paper market and little on show in the cargo market. Aramco was bidding for a 50kb parcel for delivery Jun 14-18 at a $0.35/b FOB Straits premium to paper. The differential to swaps was nudged $0.04/b higher as a result to $0.31/b, with the outright marked $1.17/b lower on the day at $89.66/b. Refining margins were mostly static, with the June crack seeing a $0.04/b rise versus Brent to +$13.26/b. The EFS continued to fall, losing another $0.53/mt to touch a six-week low of -$17.43/mt.

Marine fuel cargo indications from brokers were sparse during Tuesday's Asian trading session, with the best-priced bid in a quiet market heard at a $6/mt FOB Straits premium to the curve. An offer at the back end at $7.25/mt over did nothing to adjust cash prices, with moves in the paper market leaving the outright down $6.68/mt on the day at $546.14/mt and the June crack to Brent up $0.26/b at +$2.19/b.

High sulfur fuel oil saw only selling interest from PetroChina during Tuesday's open session, with cargoes of 180 CST offered down to flat to the paper curve. That cut $0.45/mt from Quantum's differential as cargoes were assessed a penny below swaps to leave the flat price down $6.61/mt from Monday at $421.39/mt. In the 380 CST paper market, focus was almost exclusively on trading the Jun/Jul spread as the end of May approaches. For cargoes, PetroChina was again looking to sell and offered 380 CST parcels down along the curve to a $6/mt premium to paper. That left the 380 CST outright down $6.92/mt on the day at $420.35/mt, with the June crack to Brent up $0.37/b on the day at -$10.47/b.