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Analysis: Malaysian Kimanis crude premiums see bearish outlook in Aug

Expectations for price differentials fetched by Malaysia’s Kimanis crude continue to slide in the August trading cycle, with narrowing margins and plentiful alternatives for buyers, crude traders told S&P Global Platts Tuesday.

“Kimanis crude [is expected to be] softer, [around] low $3s/b,” said a regional end user.

Buyers of light and medium sweet crude grades are seeing a variety of grades available from within Asia, as well as from workable arbitrages flowing in from the West, said traders.

“Everything is long regional [crude] and condensate [and] US [crude] keeps coming in,” the end user said.

Market sources also pointed to sliding gasoil and jet product margins as a contributing factor to lower premiums for the middle distillate-rich crude grade.

The August spread between Singapore Gasoil and Dubai crude swap has averaged $15.10/b so far this month, from $16.06/b in May, Platts data showed.

Similarly, the August spread between Singapore Jet Fuel and Dubai swap averaged $15.24/b to date in June, down from $16.23/b last month, the data showed.

Premiums for Kimanis have fallen in line with narrowing crack spreads.

Kimanis’ differential over Dated Brent averaged $3.20/b so far in June, from a whole month average of $3.48/b in May. The crude was assessed Monday at a premium of $3/b. It was last at this level on August 11, 2017, Platts data showed.

SUPPORT IN SHORTER AUGUST PROGRAM

However, the Malaysian sweet crude grade could still see some support lent to it because of a shorter-than-usual production program in August, some traders said.

A total of 5.4 million barrels of Kimanis are scheduled to load in August, a decline of 25% from July, trade sources said this week.

The latest loading program for the Malaysian crude shows nine cargoes of 600,000 barrels each, from 12 cargoes for the loading program seen by Platts in July.

The cargoes will be loaded from the Sabah Oil and Gas Terminal. State-owned Petronas is expected to load the most cargoes, with four slips over August 4-8, 7-11, 15-19 and 19-23.

Oil majors ConocoPhillips and Shell hold two loading slots each, with Conoco allocated August 10-14 and August 29-September 2, while Shell has August 1-5 and August 12-16.

Conoco is also offering its August 10-14 cargo via tender in the regional spot market, crude sources told Platts Tuesday. The tender for 600,000 barrels of the crude is due to close June 20, they said.

Petrobrunei is expected to load a single cargo of Kimanis over August 17-21. Other loaders such as Indonesia’s Pertamina or Malaysia’s Murphy Oil do not hold any cargoes for August loading, the program showed.

Crude traders said the shorter program was likely due to a production stoppage during the tail end of the month, but further details around its causes were still murky.

“The reasonable assumption is that there is some production issue for the last few days,” said a regional crude oil trader.

Petronas could not be reached for comment.

August loading program for Malaysian Kimanis crude:
Loading Barrels Equity
August 1-5 600,000 Shell
August 4-8 600,000 Petronas
August 7-11 600,000 Petronas
August 10-14 600,000 Conoco
August 12-16 600,000 Shell
August 15-19 600,000 Petronas
August 17-21 600,000 Petrobrunei
August 19-23 600,000 Petronas
August 29-September 2 600,000 Conoco

Source: Platts

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