Asia oil/products: Crude up ahead of Saudi/UAE deal, naphtha higher

14 Jul 2021

Quantum Commodity Intelligence – Middle East crude prices strengthened for the fourth consecutive day Wednesday as Asian markets closed before the breaking news that Saudi/UAE had resolved differences on production levels going forward.

Dubai cash for September delivery was assessed $74.70/b on July 14 (1630 Singapore time), up $0.35/b from Tuesday, while DME Oman settled $0.36/b higher at $74.86/b.

Cash Brent (BFOE) for September was assessed at $76.09/b, up $0.33/b on the day, while the Brent/Dubai spread narrowed to +$1.39/b, the narrowest spread in a month with the prompt Middle East market seen tight.

The row between Saudi Arabia and UAE over production levels was dramatically resolved Wednesday with a new UAE baseline of 3.65 million bpd agreed, but any agreement needs to be ratified by the full OPEC+ group.

On the cargo market, Oman was sold into India at around Dubai +$3.30/b, albeit on a delivered basis.

Products

Naphtha cracks continued to edge higher on expectations of lower refinery runs cutting supplies and the lack of alternative feedstocks. 1H September was valued at $701/mt CIF Japan on bids and offers heard $1/mt either side, while 2H September was valued $3/mt lower. Flat price was assessed at $697.75/mt as the assessed period rolls into 1H October amid a backwardated market. The crack was marked at $140/mt, a fresh 3.5 year high.

Gasoline cargoes traded several times at $84.40-84.50/b with cash marked at $84.50/b, up $0.11/b on the day. The crack fell for the second successive day, giving up the previous three days of gains. The August-September backwardation also narrowed, indicating a weaker nearby market the that spread falling to $1.20/b. The spot crack fell to a four-session low of $8.41/b.

Meanwhile, the jet crack stabilised after five days of gains, with one deal heard at a $0.40/b discount to swaps. That leaves the market in a steep contango. The spot was assessed at $78.89/b FOB Singapore, up $0.28/b on the day, with the crack falling $0.05/b to $2.80/b.

10 ppm cracks fell on the day, but the general trend is still higher so far this month amid what is widely expected to be run cuts across the region, with Japan crude stocks building to an eight-month high. 10ppm was valued at $81.42/b FOB Singapore, up $0.07/b on the day. Cracks were down $0.26/b at $5.33/b, a figure that is below June’s average.

Rising demand for fuel oil saw cash differentials to swaps climb higher for lower sulfur barrels. One deal was heard for marine fuel 0.5% at $2.25/mt over the swaps, with 380cst heard at flat to the curve. Cracks were weaker on the day.