Asia oil/products: Dubai halts slide, gasoline cracks spike

Quantum Commodity Intelligence – Middle East crude prices Friday clawed back some of the recent losses but still ended the week lower while gasoline cracks surged amid news that a nuclear deal with Iran may fall through.

Dubai cash for November delivery was assessed at $94.75/b for 2 September (1630 Singapore time), up $0.79/b on the day, while DME Oman futures were up $0.93/b at $94.67/b for the Nov22 contract.

Structure wise the market has consolidated the prompt backwardation, indicating a reasonable level of Q4 demand despite weakness in the products sector. The key M1/M3 spread (Nov22/Jan23) was pegged at $5.70/b, up around $1/b from the August average.

Spot activity was largely on hold ahead of the 5 September OPEC+ meeting, which is likely to be immediately followed by the release of Saudi's OSPs for October, where steep cuts are expected.

Traders said further output hikes for October and beyond look unlikely given current market dynamics, while some OPEC+ members were said to be lobbying for a reduction.

ICE Brent futures for Nov22 were valued at $94.99/b at 1630 Singapore, up $0.81/b from the previous Asia close, maintaining a narrow Nov22 Brent/Dubai cash spread of $0.24/b. The Nov22 EFS was slightly lower, trading around $6/b at the Asian market-on-close.

Super typhoon Hinnamnor, the strongest global storm of 2022 to date, continues to disrupt shipping and bunkering, but so far no refinery issues have been reported.

Products

Physical naphtha prices rose sharply on Friday, with BP bidding for H1 Nov cargoes at $664/mt CIF Japan versus Trafigura offering H2 Nov at $671/mt, flattening the structure. At $664.25/mt CIF Japan, cargoes are pegged at around $7.75/mt below September swaps versus a $12/mt discount on Thursday. Physical cracks firmed $2/b above Brent with Q4 cracks firming $1/b on the day versus Brent. But at -$20/b, naphtha remains structurally weak.

Gasoline physical and front month cracks spiked on Friday amid news that a possible nuclear deal with Iran may fall through. September swaps rallied $5.65/b to $98.15/b with October spiking $4.85/b to $95.15/b. The M1/M2 spread rose sharply. In the cash market bids were seen at a cash differential of $2/b for cargoes loading 15-20 days forward, a price equivalent to $99.84/b, although flat price bids were much lower. Quantum assessed the cash differential up $0.19/b on the day at $1.63/b - a price equivalent to $98.95/b, up $5.52/b on the day. Physical and paper cracks pulled away from negative territory as a result.

Aramco was offering prompt jet fuel cargoes at $3.40/b over later dated swaps while Petrochina was bidding for later dated cargoes at $1.80/b over swaps. Quantum assessed the cash differential up $0.90/b on the day at $1.90/b, giving a flat price of $133.05/b FOB Singapore, up $2.55/b on the day and seeing cracks claw back some of Thursday's losses. The month ahead jet east-west firmed to a one-week high, rising $3/mt on the day amid softer bunkering prices.

Two trades were seen in the ULSD market at $1.9/b over underlying swaps for loading 15-20 days forward. BP sold to Vitol while Vitol bought from Shell. The cash differential fell $0.10/b on the day to $1.90/b, giving a flat price of $140.16/b FOB Singapore, up $2.06/b on the day. That left crack spreads marginally firmer on the day – up around $1-1.50/b down the curve. 500ppm diffs were being offered at -$3.50/b under 10ppm swaps, widening the sulfur spread. The month ahead EFS was broadly stable indicating Asia was following Europe.

Marine fuel oil cash differentials fell closer to being negative amid offers from Trafigura at flat to swaps for mid-window loading dates and $2/mt above for later dates. The market remains extremely weak amid a huge overhang in supply and the cash differential was pegged at just $0.45/mt. That left a flat price of $664.33/mt, up $9.33/mt on the day and marginally higher than the movement in crude. 380cst HSFO was offered at a $3/mt premium to underlying swaps, pushing the cash differential down $1.75/mt to $2.50/mt, leaving a flat price of $423.17/mt. But it was the 180cst that was bid up firmly with Petrochina hitting Vitol's bid of $8/mt. Quantum assessed the cash differential at $6.58/mt, equivalent to $451.11/mt FOB.