Asia oil/products: Crude lower, weak product demand weighs

Quantum Commodity Intelligence – Asian crude prices Monday were lower as East-of-Suez markets played catch up with Friday's late Brent losses, while markets for refined products started the week in a slightly bearish tone amid quiet demand.

Front-month Dubai cash for January delivery was assessed to be $1.35/b lower at $86.90/b for 6 November, while Jan24 DME Oman was down $1.44/b at $86.78/b.

Saudi OSPs came in at the high end of expectations after confirming output cuts would remain for the rest of the year. Flagship Arab Light was left unchanged at Dubai/Oman +$4/b, despite the key M1/M3 spread crunching last month and premiums for spot medium sour barrels coming under pressure.

However, Saudi Arabia reiterated it will keep the 1 million bpd until the end of the year, prompting speculation that at least half that reduction could be extended into the new year.

OSPs for lighter grades to Asia were adjusted upwards with the improvement in gasoline cracks, while heavier grades were cut following the slump in heavy fuel cracks.

ICE Brent futures for Jan24 were valued at $85.90/b at the Asia close (1630 Singapore), up $1.32/b versus the previous Asia close. The frontline Jan24 Brent/Dubai was steady at +$1/b, while the Jan24 EFS eased to around $0.80/b.

Products

Naphtha demand in Asia remained poor but cracks were left steady on Monday as they were marked down just $0.09/mt at $26.85/mt as front month swaps fell $9.25/t on the day to $652.25/mt. That came as naphtha prices tracked wider moves in the crude market. Backwardation eased at the front of the paper curve for the first time in three sessions, with the M1/M2 spread down $0.25/mt to $1.25/mt. The east-west spread narrowed $0.25/mt to $16.75/mt. No trades were heard in the cargo market, although the most competitive offers for 1H and 2H January laycans came in at $653/mt CFR Japan.

Gasoline cracks were more resilient versus firmer Brent, with M1 cracks up $0.35/b to $5.88/b even though swaps weakened $0.90/b to $91.20/b. The front-month backwardation continued to widen, with the M1/M2 spread up $0.20/b on the day to $1.45/b. On the FOB Singapore physical side, there were plenty of bids mainly targeting Nov 21-25 deliveries of 92 RON at $2-$3/b over the curve, while bids for Nov 26-30 and Dec 2-6 were pegged at a premium of $2.50-$3/b. One offer for Dec 2-5 delivery of 92 RON was heard at $94.40/b. Those moves left 92 RON cash differentials slightly weaker, with cargoes assessed down $1.14/b on the day at $94.93/b.

Jet fuel margins slipped for the first time in five days in accordance with a weaker heating oil market. M1 cracks fell $1.20/b on the day to $23.53/b while front-month swaps dropped $2.45/b to $108.85/b. That comes with an eased backwardation at the front of the curve as well, with the M1/M2 spread down $0.10/b to $1.15/b. Action in the physical market remained quiet, with no fresh trades seen.

Friday's selloff in the crude market was still weighing on gasoil markets in Asia at the start of the new week, with Quantum's 10ppm outright price marked at a one-month low of $111.94/b. Down $3.65/b on the day, the slide came as December swaps were marked $2.75/b lower on the day at $110.15/b. Two deals were heard in the cash market, with Trafigura selling BP a 160kb parcel of 10ppm for delivery Nov 23-27 at a $1/b FOB Straits premium to the curve. In the 500ppm market, PTT sold Trafigura a 150kb parcel for similar delivery at a $3.30/b discount to the curve. Both those deals weighed on cargo differentials even when adjusted for size, while a further drop in the crude price during Monday trade was not enough to prevent refining margins from falling further as the month ahead crack was marked $1.50/b lower at $24.83/b. Backwardation eased slightly as the M1/M2 spread fell $0.25/b on the day to $1.45/b, while the EFS narrowed $3.50/mt to -$26.54/mt.

It was a quiet start to the week for marine fuel 0.5% sulfur cargoes as no fresh deals were heard after last week's rally amid tight nearby supply. The outright was assessed at $662.11/mt, down $5.75/mt on the day. That came as December swaps fell $6/mt to $613.50/mt, with Monday's moves helping to lift the month-ahead crack to frontline Brent futures $0.38/b to $3.59/b. Backwardation was back up as the M1/M2 spread gained $1.75/mt to $16.75/mt, while the east-west spread remained firm as it rose $1.90/mt to $60.64/mt.

The high sulfur fuel oil 380 CST cargo market also had a slow start to the week with no fresh deals heard during trade on Monday. Plentiful supply in both the 180 CST and 380 CST markets has left buyers in little hurry to secure fresh material, a trend that saw front month swaps fall $8.25/mt on the day to $450.75/mt. The outright was assessed at $453.86/mt, down $6.20/mt on the day. Cracks remained firmly in negative territory, largely moving sideways after a rise on Friday as December paper was marked $0.05/b lower against Brent futures at -$14.34/b. Backwardation eased, with the M1/M2 spread down $0.50/mt on the day at $4.50/mt.