Asia oil/products: Crude slumps 4.5%, lifts products refining margin

10 May 2022

Quantum Commodity Intelligence - Middle East crude oil prices slumped sharply on Tuesday, catching up with the losses in Brent, while products saw cracks firm at the top and middle of the barrel.

Dubai cash for July delivery was assessed at $103.09/b May 10 (1630 Singapore time), down $4.86/b from the previous Asia close, while July DME Oman futures were down $4.76/b at $103.13/b.

Outright crude prices came under pressure amid the global sell off, but the prompt market structure in Dubai held firm, while sellers were looking for steep premiums on physical cargoes loading in July.

The M1/M3 (Jul22/Sep22) was pegged around $4.80/b, reflected in premiums for key medium sour barrels. Oman, Upper Zakum and Al Shaheen were quoted in the region of $4.80-$4.85/b over the July Dubai swap, although traders said offers in the +$5/b region were seen as ambitious.

ICE Brent futures for Jul22 were assessed at $106.85/b on the Singapore 1630 close, down $5.11/b on the previous Asian close. The Brent/Dubai cash spread for July narrowed slightly to $3.76/b, while the July Brent/Dubai EFS was steady at $8.54/b.

Products

Naphtha cracks continued to recover from a one-year low touched last Friday, with paper markets firmer than crude in Asia on Tuesday. In the cash market, BP and Glencore were seen bidding for 1H July and 1H August cargoes, although with little sell-side interest, there was nothing booked by print time. Quantum assessed naphtha delivered into Japan in July at $910.50/mt CIF, down $18.50/mt, on the back of an H1 July bid at $913/mt and a $5/mt intermonth backwardation. The spot crack to Brent was up $19.10/mt at a three-week high of +$130.51/b.

Gasoline cracks in Asia remained firm on Tuesday, although there were some signs of weakness at the front end of the curve as time spreads were down for a fourth consecutive session. The 92 RON price was assessed $4.25/b lower than Monday at $133.75/b, while 95 RON was down $4.95/b at $137.40/b. Cracks continued to eke out gains despite already trading near multi-year highs, with the spot margin for 92 RON versus Brent up $0.88/b at +$27.34/b. Nearby time spreads continued to slide from six-week highs hit last week, with the front end of the curve losing $0.10/b from Jun-Jul.

Jet cracks in Asia were up as regional aviation demand continues to improve despite much of China remaining under strict Covid-related mobility restrictions. The cash differential was assessed at a $5/b FOB Singapore premium to nearby swaps, with an offer from Shell at the front-end of the market equivalent to $145.22/b not touching the prevailing value. That meant a flat price down $4.63/b day-on-day, but the spot crack to Brent found renewed support as it gained $0.50/b to +$36.68/b while deferred positions slipped against crude.

Diesel cracks stopped sliding into a third consecutive session, with Monday’s sell-off in the crude market preserving elevated distillate refining margins. Paper moves meant the flat price slipped $5.12/b to $151.60/b, but cracks were steady – priced just $0.01/b higher versus spot Brent at +$45.19/b. In the cash market, the most competitive mid-window bid-ask spread in the 10ppm window was almost $2/b. That left Quantum’s differential assessed unchanged at a $7.60/b premium to the curve.

Marine fuel 0.5% sulfur paper fell off in-line with the wider market weakness. A tight bid-ask spread persisted in the cash market, with mid-window offer at $21/mt FOB Singapore versus a best bid at $18/mt. With the cash differential down $0.10/mt at $21.02/mt, that left the flat price $34.50/mt at a two-week low of $805/mt. Nearby intermonth spreads were steady, with Jun/Jul holding at $22/mt.

High sulfur fuel oil prices continued to slide as paper tracked Monday’s selloff across crude. In the cash market, there were no positions seen in 180 CST, while 380 CST was bid at $6/mt FOB at the front and middle of the market and offered at $10/mt. Offers cut some $6/mt from Quantum’s differential, which was down to just above $8.75/mt over swaps. The 380 CST flat price was left $40/mt lower at a six-week low of $607.50/mt. With the nearby getting crushed as Jun22/Jul22 was down $1.25/mt at $5.50/mt, the M1/M2 calendar spread is now at its narrowest since early March.