Asia oil/products: Dubai at three-week high, gasoline crack stays negative

Quantum Commodity Intelligence - Asian crude oil markets continued the week's firmer tone Thursday in a positive reaction to the headline cut in OPEC+ quotas, while gasoline cracks in Asia remained in negative territory. 

Dubai cash for December delivery was assessed at $93.17/b for 6 October (1630 Singapore time), up $2.09/b on the day and a three-week high, while the Dec22 DME Oman futures contract was up $2.21/b at $93.35/b.

OPEC+ will reduce headline quotas by 2 million bpd from November, although analysts say the actual physical cut will be somewhere between 700,000 and 1 million bpd, with the majority of producers already in compliance due to production shortfalls.

Meanwhile, Saudi Aramco left differentials for the flagship Arab Light grade to Asia unchanged at Platts Dubai/DME Oman +$5.85/b for loading next month. Although at the low end of expectations, given last month's improvement on the M1/M3 Dubai spread, the OSPs also reflected weaker refining margins.

ICE Brent futures for Dec22 were valued at $93.57/b at 1630 in Singapore, up $1.89/b from the previous Asia close. The Dec22 Brent/Dubai spread narrowed to $0.31/b, while the Dec22 EFS was pegged at around $6/b on the Asian market-on-close.

Products

Naphtha was tightly bid and offered, with BP seeking a 1H Dec cargo at $703/mt versus an offer from Trafigura at $705/mt. No deals were heard and Quantum assessed Dec delivery at $702/mt CIF Japan, taking into account a relatively mild backwardation. Cracks were lower on the day, albeit mildly.

Gasoline 92 RON cargoes were bid at $93.40/b for 100,000 barrels for prompt loading where it traded, while a 50,000 parcel also traded on the offer at $92.75/b. RON 95 cargoes traded at $95.40/b for loading in three weeks. Physical cracks were broadly unchanged on the day versus Brent and remained negative.

No physical jet cargo indications were heard, but the relative value of jet has sunk $2/b since the start of the month. The November regrade was pegged at -$8/b, down from -$6/b at the start of the week. The cash differential was unchanged at $0.50/b over swaps, leaving a flat price indication of $124.29/b, a three-week high.

Offers in the diesel market evaporated on Thursday, with only BP seen to be bidding at higher levels day on day. European hikes owing to strikes and lower stocks in the US added to the bullish sentiment, which in turn filtered through to Asia and saw physical cracks versus Brent futures hit a four-week high of $48/b. October swaps are now pricing at almost $100/mt below LSGO futures, widening the arb west. The cash differential was assessed at $5.58/b above swaps, giving a flat price of $141.31b. That was on the back of BP bidding for a prompt cargo at $5.10/b over swaps and a later-dated vessel at $5.80/b.

Bids were raised along the curve in the marine fuel cash market, and Shell hit a Gunvor bid as it sought a cargo delivered 31 October-4 November at a $5/mt FOB Straits premium to October paper. That lifted Quantum's cash assessment by another $2.19/mt to $20.20/mt, while big moves in the paper market lifted the outright $30.42/mt to $711.25/mt. The spot crack to Brent was up $2.66/b to a two-month high of +$9.91/b as marine fuel followed a bullish distillates market higher. In Singapore, data showed a 3% rise in residual fuel inventories to a two-week high of 22.9 million barrels.

Higher bids from Trafigura for high sulfur fuel oil cargoes loading 21-25 and 26-30 October were heard at flat to swaps, which meant Quantum's physical assessment flipped into a premium to paper for the first time in weeks as it jumped $1.02/mt to $0.20/mt. In another busy day in the paper market – where Aramco and Vitol were enthusiastic sellers – the outright was marked $2/mt higher at $384/mt. For 180 CST, Vitol booked a cargo from Sinopec for delivery 23-27 October at a $4/mt FOB Straits discount to the curve, which took another $0.14/mt from the differential to a $3.21/mt discount. The flat price was left $4.81/mt lower day-on-day at $401.55/mt.