Oil markets in cautious reaction to OPEC+ hikes, products steady

London, (Quantum Commodity Intelligence) - Middle East crude oil initially edged higher Monday following the long Easter weekend, as the market gave a cautious welcome to the OPEC+ agreement to stagger production increases from May.

The OPEC+ producer group agreed to start softening production curbs by 350,000 barrels per day (bpd) in May, 350,000 bpd in June, and a further 400,000 bpd for July. OPEC+ had cut output by nearly 7 million bpd in response to COVID-19, while Saudi Arabia made an extra 1 million bpd voluntary output cut.

Dubai cash for June delivery was assessed at $61.95 per barrel on April 5 (16.30 Singapore time), up $0.50/b from the pre-weekend Singapore close, while DME Oman futures for June settled at $62.07/b.

Prices later tracked lower as European markets opened, as concerns over European lockdowns and increased Iranian exports weighed on Middle East crude.

In the Asian product markets, distillate cracks rose, residual fuels fell and light ends moved sideways.

Cracks largely flatlined, with physical trades heard at a slightly weaker differential to the underlying swaps. One physical trade was heard at a flat price of $70.80/b for Apr 25-29 for RON 92. Cracks for May were $6.46/b - 11 c/b softer on the day.

No physical deals were heard and the physical differential to swaps pointed to a marginally weaker crack for May at -$0.48 versus -$0.40 a day earlier. April swaps rose $6.50/mt but were marginally outpaced by crude.

Cracks firmed with at least three trades pointing to firmer values for nearby delivery. Discounts of $0.10/b to the underlying swaps curves traded with one at a par. With swaps also outstripping the rise in crude, cracks rose to $3.61/b from $2.97/b a day earlier.

Full front-month jet swaps rose to the highest in almost two weeks, with the May crack versus cash Brent hitting a high of $1.11/b, up from $0.57/b a day earlier.

Cash premiums to the underlying swaps weakened with one 380cst cash deal heard at a flat price to the underlying swaps curve. May swaps were up $3.50/mt on the day to $358/mt with the crack falling back to -$6.89/mt. Conversely, marine fuel 0.5% cracks rose, tracking distillates higher. No physical deals were heard and the cash was marked $0.50/mt lower than the April swaps.