Asia oil/products: Dubai above Brent, China exports weigh on dists

Quantum Commodity Intelligence – Middle East crude prices Friday rounded off the September trading cycle with a storming finish as the Dubai benchmark soared past its North Sea Brent counterpart, but distillate cracks crashed on more reports of increased Chinese export quotas.

A lively Dubai partials window saw November trading in the $89.50-$89.55/b range, while Oman traded at $89.50/b. Only one further convergence was reported Friday with Reliance nominating Upper Zakum to Gunvor, taking the monthly total up to 12 cargoes of 500,000 barrels made up of nine Upper Zakum, two Al Shaheen and a single Oman.

ICE Brent futures for Nov22 were valued at $89.42/b at 1630 Singapore, up $1.22/b from the previous Asia close, flipping the Nov22 Brent/Dubai spread back into negative territory of -$0.10/b. The Nov22 EFS retreated around $0.20/b to $5.05/b at the Asian market-on-close, while Dec22 was trading around $6.35/b. Murban partials were offered and traded at $90.00/b in the window, largely converging with IFAD Murban futures.

Meanwhile, the Australian heavy sweet Pyrenees grade continued to retreat from summer highs of more than +$30/b to Dated Brent, with latest trade heard at just above Dated +$10/b.

Products

Naphtha cargoes were bid at $654/mt for H1 Nov delivery into Japan by Chevron but did not find a buyer, with the major also bidding the H1 Nov/H2 Nov spread at flat, meaning the physical market remains in backwardation. No offers were seen. Quantum assessed physical at a $19/mt premium over swaps, unchanged on the day and producing a flat price of $659/mt CIF Japan. With paper cracks falling refining margins fell to a one-week low.

Gasoline refining margins slipped, although physical cracks held up better than the paper given the ramp up in gasoline exports expected in the second half of Q4 after yet more reports of Chinese export quotas. Vitol was seeking a benchmark 92 RON 19-23 October cargo at $90.30/b FOB with Ampol offering slight later dates at $0.10/b higher. There was a trade earlier at $90.20/b FOB. Quantum assessed at $90.17/b FOB Singapore for the full 15-30 day strip, up $0.58/b on the day. While physical diffs rose, the curve is flattening on Oct/Nov supply expectations from China.

No physical was seen in the jet market and the cash differential was unchanged on the day at $0.30/b above swaps. Diesel swaps tanked versus crude on the China export news and jet followed with the front month regrade broadly unchanged at -$7.15/b. That crushed the crack, with losses eroding most of Thursday's gains. Cracks, however, remain broadly unchanged from a week earlier. The east-west narrowed, putting the arb under some pressure.

10ppm cargoes were bid at $2/b above swaps by BP without seeing an offer. Earlier in the session, Vitol bought a cargo from Unipec at $2.50/b for prompt loading. Quantum assessed the cash differential up $0.40/b to $2.02/b, giving a flat price of $120.41/b, which was down $3.63/b on the day. Paper cracks are collapsing on the Chinese reports of increased export quotas, which is widening the EFS. The arb is now at the widest since the early days of Russia's invasion of Ukraine.

Marine fuel oil cargoes were bid at $15/mt and $16/mt over swaps, pushing up the assessed cash differential, although no trades were seen. Quantum assessed marine fuel oil 0.5% at $15.58/mt above swaps, giving a flat price of $655.18/mt FOB Singapore. Swaps largely tracked crude to leave refining margins around $7/b for physical and under $4/b for Q4. As low as that is, it is close to a six-week high as the surplus in Singapore eases. In HSFO, nothing was seen for 180cst and only offers for HSFO 380cst, which did not change the cash differential of $0.34/mt for 180cst and -$3.89/mt for 380cst.