Asia oil/products: Crude markets ease, naphtha cracks in freefall

Quantum Commodity Intelligence - Dubai crude eased back at the start of the new month as attention switched to the upcoming OPEC+ meeting, while naphtha cracks remained in freefall amid lacklustre demand.

Dubai cash for August delivery was assessed at $112.66/b on 1 June (1630 Singapore time), down $2.19/b from the previous Singapore close, while DME Oman futures for August also closed at $112.66/b, down $2.34/b.

Despite the fall in outright prices, the prompt market structure strengthened further with M1/M3 (Aug22/Oct22) at $7.03/b, up by around $0.40/b against the same spread Tuesday, indicating a tight month for August and steamy premiums on physical barrels.

Focus turns to OPEC+, and while reports have flagged increased production from those producers with spare capacity, most analysts expect the group to stick with current policy for now.

ICE Brent futures for Aug22 were valued at $117.27/b on the Singapore 1630 close, down $2.62/b from the previous Asian close. The August Brent/Dubai cash spread was assessed $0.43/b lower at $4.61/b, while the August Brent/Dubai EFS was steady at $11.64/b.

Products

Naphtha continued to slide at the start of the month, falling to its lowest level since the end of February amid persistently lacklustre buy-side interest in the cash market. With the roll to start the month, increased interest appeared in the market, with the first bids seen in several weeks making an appearance. However, those were well off the pace even as lower offers widened the cash market discount to paper along the curve. Cracks continued their freefall as a result, dropping $14.67/mt to -$13.20/mt versus Brent.

The gasoline cash market was dominated by the sell-side for both 92 RON and 95 RON, although with outright prices having hit all-time highs on Tuesday, there was little buying interest even as the market started to retreat. No seller was able to touch prevailing value despite a well-defined curve, which meant moves in the paper market left spot 92 RON cash down $3.85/b at $147.16/b FOB Singapore. Cracks to Brent were down for a second session, easing $0.94/b to a still big +$30.08/b. Fujairah stocks data showed light end inventories down 290,000 barrels at 6.314 million barrels this week.

Only Total was offering jet in the window midweek, with the value on offer well above where value had been pegged in Tuesday's session. That meant moves in swaps took $0.94/b off the outright spot price to $155.16/b FOB Singapore, with the flat price down for the first time in nine sessions. Cracks remained buoyant, however, stretching on another $1.97/b to a fresh three-week high of +$38.08/b.

Diesel saw plenty of offers at the front of the 10ppm physical market and bids at the back. That meant the structure of the cash curve flattened further and scraped $0.02/b off the differential assessment to $5.65/b FOB Singapore. That left the outright price $1.36/b lower day-on-day at $167.34/b and ended a six-session rally. Refining margins showed no sign of stopping, however, gaining another $1.55/b to +$50.26/b. Data from Fujairah showed middle distillate stocks marked 230,000 barrels higher this week at 2.526 million barrels.

Marine fuel 0.5% sulfur slipped $9.25/mt to $1,001.75/mt, but with crude down from Tuesday's high the spot crack to Brent was able to gain $1.57/b to +$28.10/b. That came as cash markets saw a wide bid-ask spread, running at over $20/mt on Wednesday to leave the cash differential unchanged at a massive $75.50/mt FOB Singapore premium to swaps. Weekly stocks data from Fujairah showed residuals down just 60,000 over the week to 10.838 million barrels.

High sulfur fuel oil saw the 380 CST spot price start the month down another $16.25/mt at $614.75/mt FOB Singapore. That came as a trade at the front of the market was booked at a $1.50/mt premium to the curve, flipping the cash differential back into a slim premium after its recent discount. Bids at the front and back of the window confirmed that move, although there were no other deals booked. The 180 CST differential was static, with a mid-window trade booked at a $6/my discount to swaps.