Asia oil/products: Dubai crude higher, diesel backwardation eases

Quantum Commodity Intelligence – Middle East crude oil prices climbed higher Thursday as markets focused on the potential winter supply crunch, particularly for diesel, although backwardation in distillates eased.

Dubai cash for December delivery was assessed at $92.35/b for 27 October (1630 Singapore time), up $2/b on the previous session, while Dec22 DME Oman futures lost ground heading into the expiry, up just $0.25/b at $90.59/b.

A quieter Dubai MOC window ahead of expiry saw Dec22 partials trading in the $92.25-$92.35/b range, converging at the higher end of the range on the close.

No further convergences were reported, but the relatively weak Oman expiry saw the Omani grade potentially setting the Dubai assessment.   

The key M1/M3 spread (Dec22/Feb23), closely watched by NOCs was back below $4/b, potentially putting pressure on Saudi OSPs for December, while the one-year curve was up $0.40/b to $13.60/b.

ICE Brent futures for Dec22 continued to make the running among benchmark crudes, up $2.92/b from the previous close at $96.02/b at 1630pm Singapore.

This left the Dec22 Brent/Dubai spread at $3.67/b, up by nearly $1/b on the day, while the Dec22 EFS was up $0.60/b to around $7.60/b at the Asian market close, the highest since early August.

Products

Naphtha swaps continued to rise for a second straight session with November reaching a two-week high of $685/mt. Yet the crack tumbled back below breakeven levels and hit -$4.61/mt, a one-week low, as Brent firmed. Liquidity in the physical market picked up with Total lifting BP's offer for a 2H Dec cargo at $689/mt, pressuring the cash diff, with the spot rising $8.50/mt to $686/mt, equivalent to a crack of -$5.51/mt.

The gasoline cargo market saw only one market player active as Unipec bid 92 RON cargoes while offering down 95 RON cargoes. It bid Nov 11-15 and Nov 14-18 cargoes at $0.50/b over the paper, equivalent to $91.33/b and $91.25/b respectively, which did not disprove the cash diff. The 95 RON offers did, however, put pressure, further narrowing the octane spreads. Unipec offered Nov17-21 and Nov22-26 cargoes at $96/b by the close, leaving the 95 RON cash diff at $5.25/b. Spot 92 RON was assessed $3.11/b higher at $91.51/b with the crack recovering to -$2.83/b, while the 95 RON crack was down to $1.66/b.

Backwardation in the diesel market softened at the front of the curve on Thursday, as tightness in Asia and European prompt markets ease from highs at the start of the month. Sulphur spreads narrowed, as Vitol bid up 500ppm cargoes again to $4.20/b over swaps, up nearly $1/b on the day. While BP and Unipec remained far apart on 10ppm cargoes, the former bidding at $4/b above swaps and the latter offering at $6.60/b. the cash diff was assessed unchanged at $6.11/b over swaps. That left physical assessed at $138.12/b, up $2.64/b on the day, almost tracking the movement in crude cent for cent. That meant Asia resisted the firmness in Europe overnight to leave the arb wider, with the month-ahead EFS at the third lowest print since April.

Trafigura lifted a jet cargo offer from Vitol at $2.15/mt over the paper, pushing the cash differential down almost $1/b to $2.15/b and leaving physical cargoes assessed at $125.05/mt, up $1.81/b on the day. Jet cracks eased as the regrade widened.

A deal in the marine fuel 0.5% sulfur cargo market saw Gunvor buy for delivery 21-25 Nov from Shell at a $15.50/mt FOB Straits premium to swaps. That lifted the back end of the cash curve while bids and offers on the rest of the curve left the structure in the front and middle steady, with Quantum's physical assessment edging $0.20/mt higher to $15.10/mt. That gave an outright up $24.05/mt from Wednesday at $656.70/mt and moved the spot crack up $0.77/b to $4.32/b. Weekly data from Singapore showed a slim 110,000-barrel rise in residual inventories last week to a three-week high of 21.1 million barrels.

High sulfur fuel oil saw a flurry of offers along the 380 CST curve in both the cargo and floating storage markets. Alvari and Repsol offered lower along the curve in the floating storage market, while Vitol led the way in the cargo market as PetroChina booked a 20-24 Nov trade at $363/mt FOB Straits. The deal and lower offers weighed on cash differentials again and a thinly traded paper market added to the downwards pressure as Quantum assessed the physical $0.59/mt lower at $0.98/mt under swaps. Despite that, the flat price was still up after Wednesday's jump in crude, with 380 CST priced $15.37/mt higher at $346.96/mt.