Asia oil/products: Crude eases on OPEC+, gasoline cracks hit 2-wk low

19 Jul 2021

Quantum Commodity Intelligence – Middle East crude softened Monday following the weekend OPEC+ deal that added 2 million barrels of crude by the end of the year, while refined product cracks fell by 1230 Singapore close after a sharp run up in crude.

Dubai cash for September delivery was assessed $71.65/b on July 19 (1230 Singapore time), down $0.55/b from the previous session.

Although the deal to increase production by 400,000 bpd each month for the rest of the year was brokered at the early-July OPEC+ meeting, the speedy resolution over the weekend still came as a surprise.

Cash Brent (BFOE) for September was assessed at $73.18/b, down $0.41/b on pre-weekend, while the September cash Brent/Dubai spread widened $0.14/b to +$1.41/b as the OPEC+ production deal has a greater impact on Middle East grades with the majority of the new output coming from the region.

Upper Zakum continues to set the Dubai assessment with Total declaring the Abu Dhabi grade to Shell on following the convergence of 20 partials in the cash Dubai pricing window – the first convergence of the month.

A convergence occurs when 20 partials are traded between two counterparties, or a total volume of 500,000 barrels.

Products

With crude volatile during the Platts trading window, cracks were skittish on Monday, with most spot cracks declining versus Brent and Dubai as products struggled to meet the late upswings in crude prices as the early close at 1230 Singapore time approached.

The naphtha flat price curve was broadly steady on the day, which, combined with a fall off in crude meant cracks were pushed ever higher. One deal was heard for 2H September at $681/mt CIF Japan in the S&P Global Platts trading window, with bids for 1H September around $9/mt lower. That left flat price for the two half months assessed at $677/mt CIF Japan, down $0.50/mt on the day and leaving a crack of almost $140/mt. The rise comes on the back of a poorer arb from Europe and rising Asian demand from crackers.

Gasoline spot saw good liquidity with a number of deals seen at $81.25/b FOB Singapore for RON 92 and $83.10/b for 95 RON. The 92 flat price was $1.05/b down on the day, with front month swaps down $0.90. As such spot cracks were at a two-week low at a nudge over $8/b as Covid continues to cast doubt over southeast Asian demand. That being said, cracks remain high versus Q2 margins with Chinese exports falling 3% in June versus May. And that comes despite what is expected to be sluggish import demand from Indonesia’s Pertamina.

No jet deals were heard, but bidding interest was reported at a $0.30/b discount to August swaps. Quantum assessed spot cargoes at $76.03/b FOB Singapore, down $0.53/b on the day and leaving cracks at $2.85/b, down $0.12/b on the day. The crack is marginally higher than June’s average and the average so far this month, despite Chinese exports of jet hitting a 15-month high.

Diesel cash differentials for 10ppm were marked at flat to the swaps on Monday with bids and offers not disproving value and 15-30 days loading assessed at $78.62/b FOB Singapore, down $0.62/b on the day. With swap values also declining faster than crude, the crack was marked lower at $5.44/b versus $5.65/b on Friday. Earlier, China published data showing exports of diesel in June rose almost 40% on the month to 586,000 bpd, although this is expected to fall off in July and August, according to market sources.

Fuel oil cracks to more than a week low. Deals were heard for 0.5% marine fuel at a $2/mt premium to swaps, but the fall in swaps outpaced that of crude by 1630 Singapore time. 180cst visc is being offered very high with Glencore hitting a Vitol offer in the Platts window with a small cargo changing hands at a huge $13/mt premium to swaps.