Asia oil/products: Crude rebounds, distillate cracks press on

Quantum Commodity Intelligence - Middle East crude prices rebounded nearly 3% as the announced OPEC+ output hike was largely dismissed, while middle distillate cracks continued to strengthen to fresh highs.

Dubai cash for August delivery was assessed at $112.10/b on 3 June (1630 Singapore time), up $3.15/b from the previous Singapore close, while DME Oman futures for August also closed at $112.10/b, up $3.10/b.

The prompt market structure eased slightly with M1/M3 (Aug22/Oct22) valued at $6.64/b, up around $0.20/b on the day, but backwardation along the forward structure widened as the one-year curve was up nearly $1 at $20.62/b.

Traders are expecting Saudi OSPs to be released on Sunday or Monday, with hikes of at least $1/b after the key M1/M3 Dubai cash spread, closely monitored by Aramco, averaged a $5.13/b in May compared to $3.65/b in April, with larger hikes expected for lighter barrels after the surge in gasoil and gasoline cracks.

ICE Brent futures for Aug22 were valued at $117.01/b on the Singapore 1630 close, up $3.63/b from the previous Asian close. The August Brent/Dubai cash spread was assessed $0.48/b higher at $4.91/b, while the August Brent/Dubai EFS was up $0.26 at $11.55/b.

Products

After a flurry of long-awaited naphtha activity midweek, incrementally lower offers from Shell throughout the Friday window down to $853/mt CFR Japan for 2H July found no buy-side interest. With that offer above where Quantum assessed the market on Thursday, differentials were unchanged and moves in the paper market were enough to see the flat price $30/mt higher to end the week at $847.75/mt. The crack eked out modest gains for a second session and undid some of the recent sell-off as it was marked $2.88/mt higher at -$8.54/mt.

Gasoline markets ended the week with aggressive offering at the front and middle of the cash market weighing on the physical assessment. The 92 RON market was offered down by PetroChina mid-window to $149.30/b FOB Singapore without trading, meaning the cash differential was assessed $1.32/b lower than Thursday at a +$3.66/b. That left the outright $4.22/b at $149.27/b, while the crack was $0.52/b higher at +$32.45/b. For 95 RON, a mid-window trade between PTT and Unipec at $152.70/b marked value and narrowed the spread to 92 RON.

Jet again saw only offers as Total found no buy-side interest in the levels on show. That left the cash differential assessed unchanged at a $3.50/b FOB Singapore premium to the curve. A big jump in swaps meant an outright up $6.96/b from Thursday at $160.58/b. Wider bullishness across distillates dragged the spot crack to Brent to a fresh high, up $3.26/b at +$43.76/b.

Diesel cracks continued to rally, hitting fresh highs as the swaps and physical markets both jumped. With 10ppm paper bid up through the window, deals at the front and back of the cash market helped supply a more-defined backwardation to the physical market than had been seen in recent sessions. Those deals added $0.75/b to Quantum's cash assessment, lifting the differential to $6.60/b FOB Singapore. That helped push the flat price to a fresh three-month high, up $7.30/b to $173.37/b. The crack continued to rally for a ninth consecutive session, jumping $3.60/b to pass early May's record high at +$56.55/b against spot Brent.

Marine fuel 0.5% sulfur ended the week with an aggressive offer at the front of the cash curve at a $55/mt FOB Singapore premium to June paper, which lowered the front end of the physical market and took $3.25/mt from the differential assessment. Priced at $72/mt over the curve, that translated into a $24.75/mt gain day-on-day to $1,011.25/mt as the crack was essentially unchanged as it priced $0.11/b lower at +$29.74/b.

High sulfur fuel oil saw a tight bid-ask spread along the 380 CST cash curve, with a deal booked at the front end of the physical market at flat to nearby swaps. That took $1.15/mt off Quantum's cash assessment, pricing just below flat to the paper market to leave the 380 CST up $23.50/mt day-on-day at $615.25/mt. 180 CST went in the opposite direction, bid up at the middle and back of the window and gaining $32.50/mt to hit $656.50/mt.