Asia oil/products: Dubai rallies 3%, VLSFO cracks keep growing

27 May 2022

Quantum Commodity Intelligence - Dubai crude raced to two-month highs Friday as the global squeeze on distillates and gasoline pulled up crude markets, while marine fuel 0.5% sulfur refining margins continued to hit fresh highs and showed little sign of slowing down amid tight supply.

Dubai cash for July delivery was assessed at $112.35/b on May 27 (1630 Singapore time), up $3.44/b from the previous Singapore close, while DME Oman futures were up $3.16/b at $112.27/b.

The Dubai partials market was seen heating up ahead of next Tuesday’s expiry with two more Upper Zakum convergences, taking the monthly total to nine, with all coming from the Abu Dhabi grade apart from a single Oman. Both Upper Zakum and Oman were valued at +$5.45/b on a July Dubai swaps basis.

The prompt market structure rebounded with M1/M3 (Jul22/Sep22) up around $0.50/b to $5.43/b, while the one-year curve widened to $20.60/b, up more than $2/b on the day.

ICE Brent futures for Jul22 were valued at $117.81/b on the Singapore 1630 close, up $3.24/b from the previous Asian close with Brent easing against Dubai for the first time in a week. The July Brent/Dubai cash narrowed $0.20/b to $5.46/b, while the July Brent/Dubai EFS hit a fresh two-month high of $10.89/b.


Naphtha prices managed to edge higher, but refining margins remain in the doldrums amid poor global cracker demand. With nothing on show in the cash market Friday, a quiet day in the paper market meant the spot crack was basically unchanged at +$47.25/mt. With crude higher, however, the flat price was able to recover from a one-month low touched Thursday as Quantum assessed $18.75/b higher at $887.75/mt.

Gasoline saw the 92 RON cash curve again well-defined, with plenty of buying interest at the front and middle of the market raising the curve. Vitol did the most lifting as Quantum assessed value $3.09/b higher at $145.87/b FOB Singapore, while the crack to Brent could only muster a $0.15/b increase to +$31/b.

Jet continued to see plenty of selling interest in the cash market, but the bid-ask spread remains cavernous with almost $4/b between buyer and seller at the back of the window and nothing bid along the rest of the curve. That meant Quantum’s cash differential remained assessed at a $3.13/b FOB Singapore premium to nearby swaps, which gave an outright up $3.26/b day-on-day at $146.87/b. The crack to Brent edged $0.32/b higher to +$32/b.

Diesel cracks improved for a fourth consecutive session, buoyed by a wider middle distillate recovery and strong buy-side interest in the cash window. Vitol booked a mid-window 10ppm cargo from BP at a $4/b FOB Singapore premium to nearby swaps, lifting the cash differential assessment by $0.14/b to $4.28/b. With swaps well bid, that lifted the flat price $4.49/b to $156/b, with the crack to spot Brent spiking $1.55/b to a two-week high of +$41.13/b.

Marine fuel 0.5% sulfur showed no signs of slowing down at the end of another stellar week, gaining another $40.25/mt to hit a fresh two-month high of $966.75/mt FOB Singapore. That came as Phillips 66 was again a seller at a massive $64/mt premium to June swaps - equivalent to $977/mt. Higher bids along the strip lifted the rest of the cash curve, with the physical differential jumping almost $7/mt to $59.75/mt over nearby swaps. Cracks continue to rally, gaining another $2.89/b to +$25.24/b.

High sulfur fuel oil continued to fall amid lacklustre demand. Only sellers were seen in the cash window, with 380 CST offered down aggressively to a $3/mt discount to the curve at the front of the market. That shaved another $1/mt off the cash differential and left it at a $1/mt discount to nearby swaps. That left 380 CST down $6.25/mt at $613.25/mt FOB Singapore, with the Hi5 spread jumping another $46.50/mt to a record $353.50/mt.