Asia oil/products: Crude slides further, boosts distillate cracks

Quantum Commodity Intelligence - Middle East crude prices retreated further Wednesday to catch up with the steep Brent losses in the previous session, while distillate and marine fuel refining margins continued to rebound amid the crude selloff.

Dubai cash for September delivery was assessed at $98.45/b for 13 July (1630 Singapore time), down $3.65/b from Tuesday's Singapore close, while DME Oman futures for the Sept22 contract were down $3.38 at $98.95/b.

Spot premiums for flagship grades were also seen easing, with Upper Zakum and Oman seen at around $8.70/b versus the underlying swap, down around $1/b since last Friday, primarily on the narrower M1/M3 backwardation.

Asian demand is expected to hold up as refiners build inventories for the peak winter period, particularly gasoil, which could see a further pull from the power sector amid soaring coal and LNG prices.

ICE Brent futures for Sep22 were assessed at $100.50/b on the Singapore 1630 close, down $4.12/b from Tuesday's Asian close. The September Brent/Dubai cash spread narrowed nearly $0.50/b to $2.05/b, while the September Brent/Dubai EFS was down by $1/b at $10.76/b.

Products

Naphtha cash markets continued to see only Glencore looking for cargoes and finding no sell-side interest on Wednesday, bidding up as high as $783/mt CFR Japan for shipment 1H September. On the outright, the flat price was assessed down $20/mt at $783/mt, with the spot crack to Brent back up $10.27/mt at +$56.52/mt.

In the gasoline cash market, Unipec booked a 92 RON cargo for loading at the front of the window from PTT at the equivalent of $112.70/b, while Vitol bought another for mid-window loading at around $112.30/b. That weighed heavily on the cash assessment as a build in US stocks data overnight was joined by figures from Fujairah, which showed light end stocks up 7% last week to a four-week high of 6.2 million barrels. Quantum assessed 92 RON down $5.48/b at $112.33/b, with the spot crack to Brent down another $1.35/b at +$13.22/b.

Jet paper remains active in the Asian jet market, but physical continued to drive scant interest from the market. With the cash differential steady just above flat to the curve, moves in swaps left Quantum's cash differential $1.09/b lower day-on-day at $136.82/b. The crack was buoyant compared to Tuesday's big selloff in crude, continuing its recent volatility as it jumped $3.04/b to +$37.71/b.

Diesel saw an offer in the 10ppm market from Trafigura at the front end of the cash market and from BP at the back end of the window weighed on the physical differential, talking $0.47/b off Quantum's assessment to $3/b FOB Singapore. The flat price fell $0.76/b from Tuesday to $148.08/b, but the spot crack to Brent bounced – jumping $3.37/b to a one-week high of +$48.97/b. An aggressive offer from PetroChina in the 500ppm market increased its discount to 10ppm. In Fujairah, stocks data showed middle distillate stocks easing off one-year highs, recording a 3% drop last week to 3.7 million barrels.

Marine fuel 0.5% sulfur refining margins continued to rise on Wednesday, narrowing the discount to distillates as persistently tight regional supply makes the economics of producing the low sulfur fuel increasingly attractive. Cash markets saw a wide bid-ask spread, but interest on the buy-side from Gunvor managed to lift the physical differential assessment by $8/mt to almost $82/mt FOB Singapore. The outright was priced $9.75/mt lower at $893/mt, with the spot crack to Brent back up $2.72/b at +$30.31/b.

High sulfur fuel oil saw only offers in the cash market, which left physical assessments unchanged and resulted in the 380 CST flat price marked down $34/mt from Tuesday at $437/mt. That further drop came despite data from the Middle East bunkering hub of Fujairah showing a 4% drop in stocks to 12.1 million barrels last week, with available volumes easing off from a one-year high.