Asia oil/products: Dubai at fresh 2023 highs, diesel arb widens

Quantum Commodity Intelligence – Asian crude prices Monday started the week on a firm footing with benchmark Dubai registering fresh yearly highs while diesel cracks rose again on European LNG fears.

Front-month Dubai cash for November delivery was assessed $91.60/b for 11 September, up $0.51/b from the previous session and the highest print since last November, when Jan23 was the front-line contract. Nov23 DME Oman also scaled new heights to settle at $91.58/b, up $0.54/b.

Spot activity was seen picking up with the events of Singapore's APPEC week out of the way, while premiums were seen holding at recent firmer levels. Flagship medium-sour barrels including Oman, Upper Zakum and Al Shaheen were again quoted just above Dubai swaps +$2/b, while the lighter Murban was again above Dubai +$3/b.

ICE Brent futures for Nov23 were valued at $90.42/b at the Asia close (1630 Singapore), up $0.47/b versus Friday's Asia close. Nov23 Brent/Dubai was steady at around -$1.18/b, while the Nov23 EFS was slightly lower at +$0.80-$0.85/b on the Asia close.

The relatively narrow Brent/Dubai EFS is expected to keep the heavy flow of Atlantic Basin arbitrage barrels coming well into the new year, in turn keeping a lid on premiums for East-of-Suez grades. Weaker freight on US Gulf-China routes is also helping arb economics.

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Three gasoline trades were seen in the cash markets, with offers pushing down the cash differential. Two 92 RON deals were heard at $104.20/b for 10 October loading dates and a further deal was heard at $104.80/b for 28 September loading. Cash diffs were marked $0.90/b lower at $2.15/b. With swap movements broadly flat to crude, cracks eased on the day. Spot cracks are down around $3/b since the start of the month, and that is due to the expectation of greater exports from China. Analysts predict that run rates at state-owned refineries hit a record high in the seven days to September 6.

Naphtha cargoes delivered into Japan in November were assessed at $8.35/mt higher on Monday at $692.85/mt CIF Japan. That left refining margins rising for the fourth straight day to a one-week high. The market structure and arbs are broadly unchanged. Physical bids were seen at $694/mt for H1 Nov versus offers of $703/mt. H2 Nov was pegged $4/mt lower. Chinese state-owned naphtha prices are down on the week, indicating higher run rates may be impacting prices.

Diesel cracks rose to a seven-session high, shrugging off concerns about rising exports from China and tracking European values higher, which climbed on LNG fears and lower supply from Russia. Front month swaps rose $1.65/b versus a broadly unchanged crude complex to leave paper cracks at $31.80/b – the highest level so far this month. Cash differentials were unchanged at $1.72/b versus offers at $1.80/b and bids at $1.30/b over swaps. That left cash cargoes assessed at $124.80/b, up $1.27/b on the day. European prices, however, have surged, leaving the EFS at its widest in seven months.

The jet regrade narrowed marginally on Monday, as front month swaps firmed more than diesel. The moves were marginal with October swaps climbing $1.80/b versus $1.65/b for 10ppm. That left the regrade at -$1.45/b. One offer was seen in the cash markets at $2.75/b over swaps, but that was above the prevailing cash differential of $2.30/b.

Fuel oil swaps broadly tracked crude and were unchanged day on day while there was little movement in cash differentials. Marine fuel oil October swaps rose $3.50/mt and the market structure was unchanged. In the cash markets, flat price offers were seen at $632-634/mt for differing loading dates, which lowered the assessed cash differential over swaps by $0.29/mt to $3.54/mt, equivalent to $632.75/mt FOB Singapore. HSFO 380cst swaps were unchanged on the day, and broadly in line with crude. Cargoes were bid at $2/mt over balmo swaps versus offers at $10/mt over. The cash differential was unchanged at $9.53/mt.