Asia oil/products: Crude lower, distillate cracks improve

Quantum Commodity Intelligence – Asia crude oil prices eased Friday as premiums for physical cargoes remained under pressure, while gasoline and diesel margins continued to recover.

Dubai cash for July delivery was assessed at $75.00/b for 19 May at the Asia close (1630 Singapore), down $0.34/b, while Jul23 DME Oman futures were $0.43/b lower at $74.89/b.

Physical markets were again struggling with premiums for medium sour barrels stumbling at around two-year lows. Oman, Upper Zakum and Al Shaheen were pegged at Dubai swaps +$0.70-$0.80/b, with sellers having to chase the market down to offload remaining July cargoes.    

Sluggish margins continued to weigh, as Taiwan's Formosa said it plans to cut runs at its 480,000 bpd Mailiao refinery by around 7%, while Japan's Cosmo Oil has shut one of two CDUs, although it was unclear whether the shutdown was part of the turnaround or an unplanned outage.

ICE Brent futures for Jul23 were assessed $76.19/b at 1630 Singapore, down $0.44/b from the previous Asia close, leaving the Jul23 Brent/Dubai spread slightly lower on the day at $1.20/b. The Jul23 EFS eased to around $2-$2.05/b on the Asia market close.

Products

The naphtha cargo market saw plenty of offers to end the week, although buy-side interest remained lacklustre. The 1H July laycan was offered down to $588/mt CFR Japan, with 2H July at $593/mt and 1H August at $591/mt. That made no difference to cash differentials to swaps, however, coming in above where Thursday's values sat. That left the outright up $0.23/mt on the day at $588.23/mt, with the spot crack to Brent up $3.52/mt at +$30.12/mt.

Gasoline refining margins rose for the third straight day on Friday and the RON 92 M1/M2 backwardation increased, leaving both indicators at a five-week high amid growing tightness in the Asian gasoline markets on the back of turnarounds and run-cuts in Asia. June swaps rose $0.70/b and July were up $0.50/b, outpacing a small decline in crude and leaving the M1/M2 spread at $1.50/b. Front month refining margins versus crude stand at $11.71/b. Cash cargoes of 92 RON were assessed at a cash differential of $0.51/b, up $0.49/b on the day on the back of trade at $88.60/b. Cash refining margins versus Brent are up almost $3/b since the start of the week. 95 RON cargoes traded at $93.30/b for prompt delivery.

10ppm diesel swaps edged lower versus a greater decrease in crude prices on Friday, leaving paper and physical cracks up for the third day out of four. Physical and paper cracks, like gasoline, are at a five-week high amid talk of run cuts at refineries in north Asia. Unlike gasoline prices, which are rising sharply on the back of seasonal demand, diesel is seeing more moderate growth, largely because of a persistent high EFS limiting shipments heading west. In the cash markets bids were seen at a $0.15/b premium over swaps versus offers of $0.60/b. The cash differential was marked at $0.13/b over swaps.

The front month jet regrade hit a five-week low on Friday of $1.60/b, with jet losing ground against diesel. The market remains flattish against a backwardation in diesel, meaning refining margins are better later down the curve. In the cash markets, only offers were reported at between $0.70-1.40/b over swaps. The cash differential for physical cargoes remains assessed at $0.20/b under swaps.

Marine fuel 0.5% sulfur saw a wide bid-ask spread persisting in the cargo market, with no deals done by the cash close in Asia. Best-priced offers were heard around $12-$13/mt FOB Straits premium to the curve, with a bid for a parcel delivered June 3-7 at a $9/mt premium. Quantum's differential held at a $9.35/mt premium to paper, giving an outright that was down $9.86/mt on the day at $553.23/mt. The crack to Brent came off slightly after a rally that ran through the rest of the week, easing $0.93/b to +$2.45/b.

High sulfur fuel oil saw plenty of sell-side interest to end the week, but there were no deals heard done by the close of business. The 180 CST market saw offers as low as a $2-$3/mt FOB Straits premium to paper, while 380 CST was offered at $9/mt over along the curve. Neither of those was enough to adjust differentials to swaps, with the 380 CST outright edging $0.18/mt higher on the day to $435.90/mt. Cracks versus Brent were up for a second session, gaining another $0.48/b to touch a two-week high of -$7.49/b.