Asia oil/products: Crude ticks higher, diesel cracks slump to 6-mo low

Quantum Commodity Intelligence - Middle East crude prices Thursday resumed the week's firmer trend with Asian demand seen holding up for Q4, while diesel cracks slipped to a six-month low as expectations of fresh Chinese supply continued to weigh on the market and take losses for the past two sessions to over 55%.

Dubai cash for November delivery was assessed at $93.60/b for 15 September (1630 Singapore time), $0.90/b higher on the day, while DME Oman futures were up $0.81/b at $93.55/b for the Nov22 contract.

Dubai partials were last traded at $93.60/b, while Oman partials were reported bid at $93.75/b. On the cargo market, Oman, Upper Zakum and Al Shaheen were all valued at Dubai swaps plus $5.90-$6.00/b, the highest levels in more than a week as medium sour crude so far shrugs off the collapse in gasoil cracks.

ICE Brent futures for Nov22 were valued at $93.62/b at 1630pm Singapore, up $0.57/b from the previous Asia close as the Nov22 Brent/Dubai spread crunched to just $0.02/b. The Nov22 EFS was trading around $0.10/b lower at $5.85/b on the Asian market-on-close. Murban partials were offered at $94.65/b, around $0.55/b under IFAD Murban futures.

Products

The naphtha cash market was quiet with best offers for the 2H November laycan at $693/mt CFR Japan from Shell and Trafigura, which found no buy-side interest. The flat price was up for a fifth-straight session, however, as it gained another $5.50/mt to touch a two-week high of $677.75/mt, with the spot crack versus Brent up another $2.72/mt at -$3.57/mt.

Gasoline traded twice in the 92 RON cash market as PTT sold a 30 September-4 October cargo to Phillips 66 at $97.30/b FOB Singapore and Total sold a 5-9 October cargo to Trafigura at $97.98/b. While those deals came early in the day, bids and offers later in the window were well below the traded values, which cut Quantum's cash assessment slightly. The flat price was marked X, while the spot crack to Brent was $2.15/b lower at +$4.34/b. In Singapore, stocks data showed a slim 70,000-barrel drop in inventories to a two-week low of 15.6 million barrels.

Jet saw a rare day of activity in the cash market as Aramco sold two cargoes to Vitol at a $0.20/b FOB Singapore premium to the curve with the cargoes loading 15-20 and 25-30 days ahead. Taken as value for the cash premium, that meant a chunky $0.93/b drop in the assessment from Wednesday. Caught up in the wider middle distillates selloff as China is expected to release fresh export quota allocations, the flat price was marked $8.57/b lower at a six-month low of $111.50/b, with the spot crack to Brent down $8.95/b at +$18.55/b. Stocks data from Singapore added to the pressure, with middle distillate inventories up 4% week-on-week at a three-month high of 8.5 million barrels.

Diesel prices continued to collapse into a second session, with the crack slumping to a six-month low as expectations of fresh Chinese supply weighed on the market, and local demand wobbles amid rolling Covid lockdowns. October 10ppm paper traded down through the window to as low as $116.70/b. And while the paper market was busy, cash was uncharacteristically quiet as the trade stepped back amid the volatility and left Quantum's cash differential steady day-on-day at $1.64/b FOB Singapore. On the flat price, 10ppm was assessed $10.69/b lower at $118.87/b. The spot crack to Brent was down $11.07/b at its lowest since March as it fell to +$25.92/b. Intermonth spreads plunged too, with the Oct/Nov spread falling $2.15/b to $1.45/b and Nov/Dec down $2.40/b at $1.40/b.

The marine fuel 0.5% sulfur cash market saw a wide bid-ask spread as Vitol represented both sides of the market for one laycan with levels $12/mt apart. With Phillips 66 and Trafigura making up the rest of the sell-side, the cash differential was left unchanged at a $1.91/mt FOB Singapore premium to swaps. With that, the flat price was assessed $2.87/mt higher day-on-day at $665.37/mt, with the spot crack to Brent barely moving for a second session – up $0.07/b at +$3.48/b. Stocks data from Singapore showed a 3% drop in residual fuel stocks last week to 19.4 million barrels.

High sulfur fuel oil continued to see brisk activity in the swaps market as over 200,000 mt of September and October paper changed hands, with Aramco on the buy-side for almost all transactions. For cash, there were bids from Trafigura for cargoes loading 15-20 days ahead at a $3/mt FOB Singapore discount to swaps and for 25-30 days ahead at a $4/mt discount, which built some backwardation back into the cash market structure and lifted Quantum's differential after several sessions of being pushed into a steep discount. Offers from Vitol along the curve prevented any further upside, with the discount narrowing $4.06/mt to a $3.29/mt discount to swaps. The outright was marked $2.55/mt higher from Wednesday at $385.13/mt. The 180 CST market was quiet, with the cash differential steady as the flat price lost $1.65/mt to $421.02/mt.