Asia crude oil: Key market indicators for Dec 6-10
Crude oil markets started the Dec. 6-10 trading week higher, with optimism for crude’s near-term outlook building after the release of Saudi Aramco’s January crude official selling prices, which analysts said demonstrated confidence in the market.
ICE February Brent crude futures stood at $71.47/b at 0300 GMT Dec. 6, up $1.59/b (2.28%) from the Dec. 3 settlement.
Middle East crude
** Market participants will look to the release of official selling prices from other Middle East producers such as ADNOC, Qatar Energy and Iraq’s SOMO in coming days, after which spot activity for February-loading crude will kick off.
** Saudi Aramco issued its OSPs for January with hikes of 30-80 cents/b across its Asia bound-crude grades.
** Spot activity for February-loading barrels is expected to soften amid tepid demand cues from China as the wait for the country’s SPR release continues, while private refiners face government scrutiny and emission curbs. Japan could also buy less crude after the winter season peak and refinery turnaround period, while India’s demand remains the strongest among major Asian economies.
** Dubai cash/futures (M1/M3) averaged $2.24/b in the week ended Dec. 3, down from $3.27/b the week before.
** Intermonth spreads narrowed in mid-morning trade Dec. 6 with February-March pegged at 25 cents/b, down 7 cents/b from the Asia close Dec. 3.
** The February Brent/Dubai Exchange of Futures for Swaps was pegged at $2.96/b in mid-morning trade Dec. 6, down from $3.13/b at the Asia close Dec. 3.
** Condensate market participants were awaiting the release of the January-loading program by Australia’s North West Shelf, with sentiment turning bearish amid weak downstream margins and some demand heard diverted to light crudes.
** Traders will also be looking out for the result of OVL’s tender offering February-loading Sokol crude for fresh pricing cues, after the Brent/Dubai EFS shrunk dramatically in the past week, weighing on sentiment for Dubai-linked Russian grades.
** For regional crudes, market participants are keeping an eye out for fresh tender activity by PV Oil, with activity expected to remain thin for Malaysian crude grades as most January-loading cargoes have been placed with end-users, according to market sources.
** For heavy sweet crudes, traders will watch for fresh activity for January-loading cargoes of Sudan/South Sudan’s Dar Blend, with market value expected to remain rangebound from the previous month.
** Market participants will look out for activity for US’s WTI Midland crude into Asia Dec. 6-10 after trades in the previous week demonstrated attractive arbitrage economics.
** Capped buying interest from Chinese private refineries is expected to keep spot differentials for Brazil’s Tupi weak.
** Crude oil futures started the week on a bullish note as Saudi Aramco’s rise in official selling prices, released over the weekend, suggested the kingdom was confident in the outlook for oil demand.
** ING analysts Warren Patterson and Wenyu Yao said in a note Dec. 6: “The increase in OSPs’ into Asia comes despite OPEC+ agreeing to stick to its plan of increasing output by 400,000 d/d in January, and despite uncertainty over the omicron variant and the expectation that the market will be better supplied in Q1 2022. The move suggests that the Saudis have confidence in the demand outlook, and the market appears to be taking comfort in that.”
** Emerging reports appeared to cement the view that the omicron variant of the coronavirus, though more transmissible, will not be as deadly as earlier strains.
** The international crude oil benchmarks ended the week to Dec. 3 lower, with February ICE Brent futures down 2.39% on the week at $69.88/b, while the January contract for NYMEX light sweet crude was down 2.77% over the same period at $66.26/b.