Asia oil/products: Dubai extends gains, gasoline crack still negative

Quantum Commodity Intelligence - Asian crude oil markets continued the week's firmer tone Wednesday ahead of the anticipated steep cut in OPEC+ quotas, while gasoline cracks moved higher but remained in negative territory at the front end of the curve.

Dubai cash for December delivery was assessed at $91.17/b for 5 October (1630 Singapore time), $2.37/b higher on the day, taking weekly gains on the Dec22 contract to around $4/b, while the Dec22 DME Oman futures contract was up $2.32/b at $91.14/b.

Dubai partials for Dec22 traded in the $91.15-$91.20/b range, but no convergences have been reported so far this month.

Prior to the meeting, talk that OPEC would announce a headline cut of 2 million bpd, or the equivalent of an actual cut of around 1 million bpd, helped further shore up market structure, with most of the cuts coming from Middle East producers.

The key M1/M3 spread (Dec22/Feb23) was pegged at a fresh three-week high of $5.70/b on anticipated tighter prompt supplies, while medium sour grades were again heard offered at around Dubai swaps +$6/b for December.

Attention also switched to Saudi OSPs, scheduled for release Thursday, with traders expecting a small increase in differentials, reflecting lower exports as a result of the OPEC+ cuts.  

ICE Brent futures for Dec22 were valued at $91.68/b at 1630pm Singapore, up $2.17b from the previous Asia close. The Dec22 Brent/Dubai spread narrowed slightly to $0.51/b, while the Dec22 EFS was heard trading at around $6.35/b on the Asian market-on-close.

Products

A naphtha cargo was booked for the 2H November sailing window at $703/mt CFR Japan as BP bought from Trafigura. While that was outside of the Quantum assessment timeframe, cash markets were clearly headed lower, and the physical differential eased off a touch. That left the outright price jumping $27.50/mt to $694/mt, with the spot crack to Brent up $12.33/mt at +$23.89/mt. Data from Fujairah showed light end stocks continued to build last week, touching a six-week high of 7.8 million barrels.

Gasoline cargoes changed hands three times in a busy cash window, with the 20-24 October laycan trading down from $92/b FOB Straits between SK Energy and Aramco to $91.20/b as Vitol bought from PetroChina. 31 October-4 November also traded at $90.60/b as PTT bought from Vitol. That adjusted the physical differential lower and crushed the front end of the market's structure, with moves in a busy paper window leaving the outright up $4.25/b at $90.85/b. The spot crack rebounded from Tuesday's drop but remained in negative territory, up $2.18/b at -$0.57/b. Moves further along the curve were more pronounced, with the average Q4 crack back up to flat to Brent.

Jet cash markets saw another quiet session, with a lack of fresh indications keeping the cash differential assessed steady at a $0.50/b FOB Straits premium to nearby swaps. Paper markets were more active, however, with the Oct/Nov spread trading with a $0.50/b backwardation and the November regrade at $8.10-$8.20/b. Those moves left Quantum's assessment up $2.63/b from Tuesday at $116.84/b, with the spot crack to Brent up $0.56/b at +$25.42/b. Fujairah inventory data showed middle distillate stocks easing off an 18-month high last week to 4.4 million barrels.

Diesel action was focused on the 10ppm market for the first time in several sessions, although only two buyers were present to lift Quantum's cash differential between them as they found no sell-side interest. BP and Total bid up the 20-24 October and 25-29 October delivery windows, adding $0.82/b to Quantum's cash differential as it was priced at a $4.08/b FOB Straits premium to swaps. On the outright, that left 10ppm up $5.52/b from Tuesday at $132.73/b with the spot crack to Brent jumping $3.45/b to a two-week high of +$41.31/b.

Marine fuel 0.5% sulfur traded twice, with Gunvor buying from Shell for loading 20-24 October at a $42/mt FOB Straits premium to November paper and again from Vitol for 22-26 October at an $18/mt premium to nearby swaps. That raised the front end of Quantum's cash curve in an otherwise quiet window that saw only those three participants, with the flat price assessed $19.41/mt higher at $680.83/mt and the crack up $0.74/b at +$7.25/b. Stocks data from Fujairah showed residual fuel inventories up 2% last week at 12.6 million barrels.

High sulfur fuel oil also traded twice, with a 180 CST cargo booked by Vitol from Mercuria at a $3/mt FOB Straits discount to swaps for delivery 25-29 October. A 380 CST cargo was booked by PetroChina from Vitol at an outright price of $382/mt FOB for 24-28 October. The first deal weighed on Quantum's 180 CST cash differential, which slipped $1.15/mt to -$3.07/mt, while the latter lifted the 380 CST assessment $0.88/mt to -$0.82/mt. Those moves and a well-traded paper market left 180 CST up $17.41/mt at $406.41/mt and 380 CST up $19.42/mt at $382/mt.