Asia oil/products: Crude slides, distillate selloff stabilises

Quantum Commodity Intelligence - Middle East crude prices Friday tumbled sharply to leave the benchmark Dubai little changed for the week, while the sharp selloff in the middle distillates market stabilised heading into the weekend.

Dubai cash for November delivery was assessed at $91.02/b for 16 September (1630 Singapore time), $2.58/b lower on the day, while DME Oman futures were down $2.55/b at $91.00/b for the Nov22 contract.

However, Dubai made strong gains versus Brent, while the prompt structure also improved, highlighting an increasingly healthy outlook for winter crude demand from Asia and shrugging off this week's collapse in gasoil margins.

The key M1/M3 spread (Nov22/Jan23) topped $6/b for the first time since early August, while the one-year curve gained around $0.60/b on the day to $14.40/b.

Dubai partials were traded in the $91.01-$91.05/b range, while Oman partials were bid at $91.15/b. On the cargo market, Oman, Upper Zakum and Al Shaheen were all valued at Dubai swaps plus $6.10-$6.20/b, the highest in six weeks.

ICE Brent futures for Nov22 were valued at $90.57/b at 1630pm Singapore, down $3.05/b from the previous Asia close as the Nov22 Brent/Dubai cash spread flipped to minus $0.47/b. The Nov22 EFS was trading around $0.10/b lower at $5.75/b on the Asian market-on-close. Murban partials were offered at $92.05/b, around $0.50/b under IFAD Murban futures.

Products

Naphtha activity was thin on the ground to end the week, with little in the way of activity in either the swaps or cash markets. Limited moves in broker curves left the spot assessment steady at $677.75/mt as the front of Quantum's assessment window moved to the 2H November laycan, while backwardation steepened for deferred positions along the curve. The spot crack to Brent bounced into positive territory for the first time in a month, gaining $22.13/mt to +$18.56/mt.

Gasoline fed off midweek weakness in the middle distillates market, with the flat price succumbing to pressure in the rest of the barrel. In the cash market Friday, Aramco sold a 100,000-barrel 92 RON cargo to Trafigura at a $2.30/b FOB Singapore premium to the curve. Offers through the window helped add to the downwards pressure, with Quantum's cash differential slashed as moves in the swaps market left the flat price down a chunky $7.32/b at $89.97/b – its lowest price year-to-date. The spot crack to Brent was down for a third successive session, with the pace of the selloff picking up as Quantum marked the refining margin down $4.30/b at a two-week low of just +$0.04/b.

Jet participation in the cash market was limited to Aramco and Unipec, with both sides of the market represented but only able to confirm the prevailing cash differential assessment at a $0.21/b FOB Singapore premium to swaps. That translated into a flat price down $1.63/b at a fresh seven-month low of $109.87/b, although the spot crack to Brent stabilised after the week's selloff as it gained $1.93/b to +$19.94/b.

Diesel prices halted their two-day freefall with cracks stabilising and even managing to recover a touch against rising crude prices. In the cash market, participation was limited after the week's volatility as Vitol, PetroChina, and Unipec confirmed prevailing value at a $1.64/b FOB Singapore premium to the curve. While that weighed on the 10ppm outright, which was down another $2.04/b at a seven-month low of $116.83/b, the refining margin versus Brent improved for the first time since the start of the week and gained $0.98/b to $26.90/b. Even with Friday's moves, the crack has still lost almost 44% of its value since last Friday.

The marine fuel 0.5% sulfur cash market was dominated by the sell-side showing high ball offers that found no buying interest through the session. Vitol was looking for $11/mt FOB Singapore across the strip, which was well above Quantum's prevailing cash differential, which sat at just $1.91/mt above swaps. With that, the flat price was marked $26.86/mt lower day-on-day to end the week at $638.51/mt, with the spot crack to Brent down $0.87/mt and wiping out a six-day winning streak of modest gains for refiners.

High sulfur fuel oil trade was quiet, with a deal heard in the 380 CST cash market as a cargo was booked by Trafigura on a Vitol offer for loading 15-20 days ahead at a $1/mt FOB Singapore discount to the curve. On the flat price, 380 CST was down $5.06/mt at $418.66/mt.