Asia oil/products: Crude retreats, gasoline cracks ease on Covid fears

21 Jul 2021

Quantum Commodity Intelligence – Middle East crude prices Wednesday were sharply lower from the previous assessments Monday, but largely playing catch-up with the steep falls in Brent since Middle East crude was last assessed.

Meanwhile in refined products, light end cracks slipped on Wednesday, while middle distillates and fuel oil prices rose.

Dubai cash for September delivery was assessed $68.64/b on July 21 (1630 Singapore time), down $3.01/b from the previous session.

Tuesday was a holiday in Singapore, while prices were assessed Monday at 1230 Singapore time, largely before the sharp falls in Brent futures

Meanwhile, DME Oman futures for September settled $68.75/b at the Asia close, compared to Tuesday’s settle of $67.44/b.

Cash Brent (BFOE) for September was assessed at $70.17/b, down $3.01/b on the Monday Asia close to leave the Brent/Dubai case spread unchanged at $1.51/b.

Spot market activity has started to pick-up with Banoco Arab Medium heard at OSP less around $0.55/b, while September ESPO was reported around Dubai swaps +$2.80/b.

China’s Rongsheng has tendered for September barrels, but a relatively modest 500,000-2 million barrel, as tight import quotas continue to crimp teapot buying.

Reports that China will could resell 20 million barrels from storage could further hinder spot buying from China.

Products

Naphtha cracks eased on Wednesday amid limited buying interest and lower European prices, although they remain at historically high levels. The east-west spread rose to $15.5/mt for August, up $1-2/mt in a week and improving the arbitrage economics. Spot cargoes for delivery into Japan were bid at $649/mt for 2H September and $643/mt. fir 1H October. Quantum assessed at $650/mt, leaving the crack at $135/mt.

Gasoline cracks slipped to a near three-week low as Australia announced more lockdowns and amid rumours of a stock build in the US. Several deals were heard at around $77.85/b, narrowing the backwardation to August sharply and hauling down the crack to $7.68/b – the lowest since 1 July.

Jet fuel cracks rose amid strong bidding interest in the Platts window. There was no fundamental driver behind the rise with OAG estimating a 0.3% decline in flights for the rest of the year, but cash differentials narrowed to their lowest in weeks at $0.15-0.20/b under swaps on lower supply. No deals were heard and the flat price was assessed at $73.34/b, leaving cracks above $3/b for the first time in five weeks at $3.17/b, up $0.32/b since Monday. Fujairah stocks are at a near three-month low.

10ppm diesel cracks rose, albeit more marginally than jet and narrowing the regrade to $2.42/b from $2.59/b on Monday, when the markets were last assessed. No deals were heard but a narrow bid and offer spread in the Platts trading window left Quantum assessing the market at flat to swaps, unchanged. Swaps firmed marginally, leaving the crack at $5.59/b, up $0.15/b on a flat price of $75.76/b, down $2.86/b.

Fuel oil cracks also rose versus Monday’s close, with marine fuel oil cracks remaining at relatively high levels of $3.71/b on a 6.9 density basis. Fujairah stocks remain steady and bunkering prices in China remain at a premium. Distillates remain strong and bidding for 0.5% was heard at $1.50/mt over underlying swaps for cargoes. 380cst higher sulfur was bid at $2/mt over swaps.