Asia oil/products: Crude rally continues, eats into distillate cracks

28 Jun 2022

Quantum Commodity Intelligence - Middle East crude continued the week’s firmer trend Tuesday, with those gains eating further into spot cracks in the light end and middle distillate markets.

Dubai cash for August delivery was assessed at $113.16/b on 28 June (1630 Singapore time), up $3.21/b from the previous Singapore close, while DME Oman futures for August closed at $113.05/b, up $2.79/b.

A lively Dubai partials saw another two Oman cargoes declared following convergence – with both Unipec and Totsa selling to Trafigura. On a swaps basis, both Oman and Upper Zakum were valued at +$8.85/b, the highest differential since March.

Dubai held firm with M1/M3 (Aug22/Oct22) at around +$8.85/b, while the one-year curve was at a fresh three-month high of almost +$24/b, amid reports that OPEC has almost exhausted spare capacity.

ICE Brent futures for Aug22 were assessed at $116.52/b on the Singapore 1630 close, up $3.07/b from the previous Asian close. The August Brent/Dubai cash spread narrowed slightly to to $3.36/b, while the August Brent/Dubai EFS was down $0.15/b at $12.19/b.

Products

Naphtha swaps were heard changing hands for August at $820/mt, while cash markets saw a trade from Trafigura to Vitol for 2H August shipment at $836/mt CFR Japan. The outright was marked $10.50/mt higher day-on-day at $836/mt, although refining margins again unwound recent gains as the spot crack to Brent slipped $11.86/mt to +$8.22/mt.

Gasoline saw spread between different octanes compacted as physical activity picked up, with trades in the cash market seen mid-window 92 RON in Singapore booked at $148.80/b, with 95 RON changing hands for similar delivery dates at $155.80/b and 97 RON at $157.70/b. Despite that, the spot crack for 92 RON eased off further as it slipped $2.62/b to +$35.87/b.

Jet interest in the cash market continues to pick up from lows seen earlier in the month, although it was BP doing all the lifting in the Asia window as it bid up the front end of the cash curve but could not get near offers across the strip from Aramco. That left the cash differential steady from Monday and meant moves in the paper markets shaved $1/b off the outright to $162.06/b FOB Singapore. Cracks continued to slide amid a wider easing in the middle distillates market, with refining margins versus spot Brent tumbling $4.05/b to +$49.13/b.

Diesel markets in Asia had plenty of buy-side interest in the physical market, although four buyers in the hunt for 10ppm cargoes remained off the pace of where prevailing value sat in the market. Leaving the cash differential unchanged from Monday, outright 10ppm prices in Singapore were marked $2.72/b lower at $177.08/b while spot refining margins versus Brent slumped $5.77/b to a two-week low of +$64.15/b.

Marine fuel 0.5% sulfur saw a trade at the front of the market was booked from BP to Sinopec at a $74/mt FOB Singapore premium to nearby swaps. Weighing on the front end of the cash curve, the rest of the physical structure remained unchanged. The flat price was marked $17.50/mt higher at a one-week high of $992.50/mt, with the spot crack to Brent crude easing for a third session from all-time highs as it slipped another $0.51/b to +$30.91/b.

High sulfur fuel oil had little fresh information in the 380 CST cash market, which meant prevailing differentials held steady and moves in the swaps market lifted the flat price $9/mt to $582/mt FOB Singapore. For 180 CST, there was a trade at the front of the cash window as PetroChina sold to Trafigura at a $1/mt FOB premium to nearby swaps to lift the differential assessment. Despite that, lower swaps meant that the spot cash assessment was up just $1/mt at $616/mt.