Asia oil/products: Crude premiums firmer, gasoline cracks near +$40/b

Quantum Commodity Intelligence – Middle East crude prices were little changed Friday but premiums for physical barrels were again seen firming, while gasoline rounded off a solid week with cracks up $7/b from last Friday. 

Dubai cash for August delivery was assessed at $106.50/b on 24 June (1630 Singapore time), up $0.05/b from the previous Singapore close, while DME Oman futures for August closed at $106.51/b, up $0.04/b.

Premiums for medium sour grades hit three-month highs for August-loading barrels with Q3 demand seen as healthy. Upper Zakum and Oman were valued close to +$8/b over the Dubai swap for the corresponding month, while Al Shaheen was seen above +$8.50/b.

The Dubai structure was firmer as M1/M3 (Aug22/Oct22) topped +$7.90/b, which along with soaring refining margins is likely to lead to a steep hike in Saudi OSPs for August.

ICE Brent futures for Aug22 bounced sharply in relation to Dubai, assessed $110.60/b on the Singapore 1630pm close, up $1.08/b from the previous Asian close. The August Brent/Dubai cash spread rebounded over $1/b on the day to $4.10/b, while the August Brent/Dubai EFS was also up by more than $1/b at $12.03/b.

Products

Naphtha physical cargoes broadly tracked crude on Friday, but relative to crude naphtha ended the week much stronger than where is started. Quantum assessed at $820/mt for cargoes delivered into Japan in H2 August and H1 September. The relative rise in naphtha is coming on the back of surging gasoline prices with the discount to ethylene – an indicator of demand from petchems – well under profitable levels to turn liquid into C2. Naphtha remains relatively weak, with the crack at -$15/b, or $31/mt.

Gasoline physical cracks rose more than $1/b to hit a fresh record of near $40/b on Friday, supported by a strong forward curve. One physical cargo of 92 RON changed hands at $146.50/b, but that was done when front month Brent was at $110/b. By the 1630 Singapore close Brent was up about $0.50/b. Quantum assessed at $147.34/b, narrowing the cash differential from $5.40/b to $4.80/b. Paper cracks rallied more, up $2.50/b on the day to flatten the backwardation. But the weaker structure was more to do with rising demand for Q3 rather than a weaker prompt market. Gasoline demand remains firm and cracks are up $7/b on the week.

Jet cargoes were offered aggressively in the Platts window, crunching the cash differential to swaps from $3/b to $2.64/b. That pushed down the cash assessment to $163.53/b, down $1.41/b versus a marginal rise in crude to leave spot cracks at $55.98/b, down almost $2/b on the day, but remaining at close to record highs. The regrade to diesel widened to a fresh record on Friday with July trading at -$13.15/b, down more than $2/b on the day due to the weaker jet. That widened the discount of Asian jet swaps versus European July swaps to $115/mt, the second highest print in a month. Asian cracks were broadly stable on the week.

Cargoes of diesel continued to be well-bid with few offers in sight. Prompter cargoes were being bid at $7.80/b above swaps, with later dated cargoes $1.30/b lower. The cash differential was assessed at just over $7/b for the full 10-25 day laycan with flat prices marked at $180.92/b FOB Singapore, up $0.84/b on the day. Like gasoline the backwardation in the market is flattening on stronger Q3 demand with paper cracks gaining more than physical. In terms of price movement, Asia continues to track Europe with the EFS broadly unchanged. Like gasoline, cracks are up almost $7/b on the week.

Marine fuel oil prices tracked crude higher with the cash differential marginally down on the day to $76/mt on two trades at that level and at $75/mt over swaps in the Platts window with Petrochina buying from Repsol and Sinopec from Trafigura. That valued flat prices at $963.50/mt, up $1.50/mt on the day and a premium over Brent of about $32/b. Backwardation steepened $2/mt for the front month to $63.75/mt and the premium of July swaps over Europe widened $5/m to $96/mt, meaning flows from Europe into the region are more likely. HSFO 380cst tracked the flat price move, rising $2/mt up on firmer swaps. In the cash market cargoes were offered flat to underlying swaps, but with few takers. The cash differential as was assessed at -$0.18/mt.