Asia oil/products: Crude premiums firm, jet arb widens

8 Feb 2022

Quantum Commodity Intelligence – Asian crude prices eased slightly Tuesday, following the broader global trend, while it was a mixed bag for refined products, as the jet arbitrage west blew open and the naphtha east-west spread for March closed in on zero, meaning tight supply for naphtha in Asia is set to continue.

Dubai cash for April delivery was assessed at $90.40/b February 8 (1630 Singapore time), down $0.52/b from the previous Asia close, while April DME Oman futures were also down $0.52/b at $90.86/b.

With the weekend release of Saudi OSPs, other NOCs are expected to follow with similar increases, while tentative talks in the spot market get underway.

Upper Zakum was again seen as the lowest of the ‘Dubai basket’ medium sour crude grades and expected to set Dubai again this month, valued at around Dubai swaps +$3.50/b, while Oman and Al Shaheen differentials were seen nearer +$4/b.  

Lower-sulfur barrels were seen attracting steep premiums as distillate and gasoline cracks continued to firm this week. Murban was pegged at around Dubai swaps +$5.50/b, while WTI Midland was quoted at close to Dubai +$8/b into China.

April Cash Brent (BFOE) was assessed $91.89/b at 1630pm Singapore time, down $0.66/b on the previous-Asia cash close, falling slightly against Dubai.

The April cash Brent/Dubai spread was down $0.14/b at $1.49/b, while front-line April EFS was slightly softer at $5.11/b.


Naphtha cracks fell back from highs on Tuesday as higher prices hit demand in the ethylene sector, with producers unable to pass the high oil prices on in plastics. No physical deals for cargoes were heard, but there was very little buying interest and only offers seen in the market. Quantum assessed April deliveries at $833/mt CIF Japan, down $10/mt on the day on the back of weaker crude. The crack versus nearby Brent fell $4/mt to $162/mt. The market structure is starting to show some weakness, with the April/May narrowing to reflect the expected arrival of European volumes. The Feb east-west turned negative and March fell to $2.75/mt, reflecting little hope of western supply before then.

Gasoline cracks bounced back in trade on Tuesday, supported by a shortage of physical tonnes as well as demand optimism in Asia. No physical deals were heard, but bids were seen for cargoes at above $105/b, leaving Quantum’s assessment at $105.28/b FOB Singapore, up $0.06/b on a day when crude fell. That left cracks up $0.82/b versus Brent at $13.84/b – the second highest print in three months. Feb/March spreads bounced back to $1.45/b despite February being a shorter month. India, Taiwan continue to tender.

Jet cash differentials were crushed on Tuesday, pushing cracks down to a one-week low and widening the discount to diesel to fresh records as Shell was heard offering cargoes down aggressively in Singapore while simultaneously bidding up the Arab Gulf to demonstrate an open arb. Shell offered a cargo for loading 15-20 days forward at $0.80/b over swaps – equivalent to $104.50/b FOB Singapore. That is where it traded, leaving Quantum to assess at $104.26/b for the full 15-30 day laycan after reflecting backwardation in the market. At the same time, Shell was seen bidding at $4.80/b over MOPAG swaps for cargoes loading out of the Arab Gulf. That differential is up $2/b in a month and reflects tighter supply of jet in Europe than Asia. In layman’s terms, jet fuel loading out of AG is priced around $2.50/b above Singapore barrels.

Diesel 10ppm retreated from its recent rally, although prices remain elevated as cash differentials continued to gain ground. A trade at the front end of the window at $2.08/b FOB over nearby swaps between Mecuria and Vitol was normalised to add $0.22/b to Quantum’s cash assessment and leave the differential at $2.25/mt. The outright lost $1.06/b day-on-day and left prices at $109.37/b. Despite the retreat, diesel’s six-week-long rally in the region remains intact for now, with cracks to Brent only slipping $0.30/b from Monday and remaining near two-year highs at +$17.93/b.

Marine fuel 0.5% sulfur prices reversed from their recent rally as the wider oil market slipped Tuesday. The cash differential was assessed $2/mt lower day-on-day at $12.29/mt FOB Singapore after a front end offer in the window moved the curve lower. With crude and paper also coming off, the flat price was marked lower for its first session in seven, losing $15/mt to $694.25/mt. And cracks also lost ground despite falling Brent, with the spot refining margin down for a third consecutive session as it slipped $1.41/b to +$9.18/b.

High sulfur fuel oil cracks continued to erode, with prices coming off in the physical market too. Cash differentials on both viscosities were assessed lower as offers moved the physical forward curve lower. That left 180 CST down $0.25/mt to a $0.69/mt FOB premium to nearby swaps and 380 CST down $0.65/mt to a $0.22/mt premium. That left flat prices retreating along with the wider downwards movement across the oil market Tuesday, with 180 CST down $8/mt at $516.25/mt and 380 CST down $6.50/mt at $504/mt. And cracks continued to slide against Brent to three-month lows, with 180 CST down $0.50/b of -$10.14/b and 380 CST down $0.26/b at $12.07/b.