Asia oil/products: Dubai crude gains on Brent, gasoline cracks continue to rise

5 Jul 2021

Quantum Commodity Intelligence – Middle East prices edged higher Monday ahead of the third round of OPEC+ talks, while all cracks bar residual fuels rose on Monday as forecast product demand kept up with rising crude prices.

Dubai cash for September delivery was set yet a new 26-month high of $74.65/b on July 5 (1630 Singapore time), up $0.60/b from Friday, while DME Oman futures for September settled $74.75/b at the Asia close, up $0.36/b.

Wranglings over the OPEC+ deal kept the market on edge throughout the day, but prices nudged higher with Asian markets seen undersupplied for the second half of the year, even if the 400,000 bpd monthly increments are implemented by OPEC.

Cash Brent (BFOE) for August was assessed at $76.30/b, up $0.63/b from Friday’s Asian close, narrowing the spread while Brent/Dubai was little changed at +$1.65/b and the Brent/Dubai EFS at $3.89/b.

Products

Naphtha cracks continued to surge. No deals were reported, but 1H September was heard bid at $692/mt CIF Japan with 2H September bid at $686/mt CIF Japan. The assessment was marked at $690/mt with the crack now standing at $128/mt on firm petrochemical demand on a regional economic recovery.

Gasoline cracks rose above $9/b to their highest level in months as strong nearby demand widened the backwardation. One deal was heard at $95.40/b FOB Singapore for RON 92 gasoline and with the Aug-September backwardation rising, it became clear that nearby gasoline demand was outpacing crude.

Jet cracks firmed to their highest level in almost two weeks on Monday, although they were recovering from a low baseline. OAG said more than 3 million seats were added last week compared with the week before with global capacity at 78.6 million, around a third down in the pre-pandemic levels. An increase in passenger numbers in northeast Asia offset a decline in seats in southeast Asia. Bids and offers were heard at a discount of -$0.40 to 0.35/b to the underlying swaps curve. The spot was assessed at $78.80/b with a crack of $2.47/b.

A similar picture emerged for 10ppm diesel. One trade was heard at a cash discount of -$0.10/b, broadly unchanged on the day, but a rise in swaps hauled up cracks. Spot cracks are now at their highest level in more than two weeks as July-Aug swaps creep into a $0.05/b backwardation. Spot was assessed at $81.73/b, with the crack at $5.43/ - the highest since 18 June.

Fuel oil cracks slumped with higher crude, although cash differentials rose for all three grades. Trades were heard at $2.50/b and $1.00/mt over the underlying swaps for 180cst and 380cst 3.5% sulfur grades, leaving flat prices up $3/m to $433.25/mt and down $0.75/b to $423.50/mt, respectively. Marine fuel prices rose to $546.50/mt, assessed at a $0.75/mt premium to the swaps on bids of $0.00/mt and offers of $1.00/mt. That left the crack at $2.90/b, down just $0.09 on the day.