Asia oil/products: Dubai backwardation soars, product cracks rise

2 Jul 2021

Quantum Commodity Intelligence – Middle East crude prices edged up to fresh 26-month highs Friday, as uncertainty over OPEC+ announcing modest production increases was seen keeping markets tight in Q3.

Dubai cash for September delivery was assessed at $74.04/b on July 2 (1630 Singapore time), up $0.25/b from Thursday, while but DME Oman futures for September settled $74.39/b at the Asia close, up $0.36/b.

Meanwhile, Dubai registered the widest front-spread backwardation since April 2019, assessed at +$1.50/b, with the Q3 period seen particularly tight.

OPEC+ discussions have focused on adding 2 million bpd of additional crude by year end, starting in August with a 400,000 bpd increase, which on current forecasts will not do enough to close the supply/demand gap.

Cash Brent (BFOE) for August was assessed at $75.67/b, up $0.11/b from Thursday’s Asian close, while the Brent/Dubai cash spread narrowed to $1.62/b.

Products

All cracks rose on Friday, bar jet.

Naphtha cracks continued to march higher on Friday despite reports that crackers would be down in the region for several weeks. No deals were heard and spot for delivery in September was assessed at $678/mt CIF Japan, leaving the crack at $122.76/mt.

RON 92 gasoline cracks rose another $0.60/b on the day as swaps climbed sharply nearby, with the July-August time spread rising from $0.60/b to $0.85/b and the  Aug-Sep backwardation rising from $1/b to $1.20/b. The increase comes despite softer US cracks, meaning it’s likely a regional demand/supply imbalance. For spot, several deals were heard at $83.70-83.78/b FOB Singapore, with one RON 95 deal heard at $86.08 FOB Singapore, blowing out the 92-95 spread.

Jet fuel cracks eased on Friday driven by a fall in swaps and a chunky cash differential of more than $0.40/b below the underlying. While jet cracks are falling globally, it’s in Asia where the pinch is most felt with the east-west widening. No deals were heard and flat prices were marked at $77.78/b FOB Singapore, leaving the crack at $2.11/b.

Diesel 10ppm cracks rose marginally on the day by a firmer cash differential. Two deals were heard at a $0.10/b discount to second half July swaps after days of illiquidity. Flat prices were marked at $80.75/b FOB Singapore with the crack at $5.08/b.

Fuel oil cracks improved on firmer cash differentials with several deals for 380cst heard at a $3/mt premium to the swaps market. That left 380cst 3.5% sulfur assessed at $424.25/mt and a crack of -$8.86/b. Marine fuel 0.5% cracks largely moved sideways. Flat prices were marked at $542.75/mt with a crack of $2.99/b on a 6.9 density basis.