Asia crude oil: Key market indicators this week

Crude oil futures retreated marginally during mid-morning trade in Asia April 5, after the OPEC+ alliance announced its plans late April 1 to gradually taper off production cuts from May to July.

Middles East

** The week commences with eyes on issuance of official selling prices by various Middle East oil producers. Saudi Aramco issued OSPs for Asian bound crude with a hike of 20-50 cents/b across their various crude grades. OSPs by other producers namely ADNOC, Iraq’s SOMO and Qatar Petroleum are awaited.

** Focus also remains on the decision by the OPEC+ alliance to gradually ease oil production cuts, including Saudi’s voluntary cuts. With fresh COVID-19 outbreaks and tepid demand scenarios, the impact of additional oil supplies will be closely watched by the market.

** Spot trading and tender activity was sluggish in the week ended April 3, as most end-users had completed their procurement requirements early in the trading cycle for May-loading barrels. IOC issued tenders closing April. 1 for sweet and sour crude grades from various regions, however, the outcome of the tenders are awaited.

** Dubai cash/futures (M1/M3) averaged $1.26/b in the week ended April 1, against $1.15/b in the week ended March 26. For the month of March, the M1/M3 spread averaged at $1.19/b, up from 69 cents/b in February.

** Intermonth spreads narrowed during mid-morning trade April 5 with June/July pegged at 45 cents/b, down 5 cents/b from the Asia close April 1.

** June Brent/Dubai Exchange of Futures for Swaps was pegged at $2.83/b at mid-morning April 5, down 8 cents/b from the Asia close April 1.
Asia-Pacific crude

**Procurement activities by Indonesia’s Pertamina will be closely watched in the week of April 4, as market participants await fresh cues on ultra-light sweet condensate prices which have fallen on tepid demand and weak naphtha cracks.

**For the heavy sweet crudes, traders will be keeping a close watch on the tender results for Sudan/South Sudan’s April loading Nile Blend and Dar Blend, as sentiment are expected to remain low amid bearish fuel oil cracks.

**Australia’s Vincent May-loading cargo will also be in focus, as limited availability of Pyrenees barrels for May-loading could offer some support to Vincent crude’s price.

**On the regional official selling prices, or OSPs, market participants will be awaiting Brunei’s February OSP and Indonesia’s March ICP this week.
Delivered crude

**Further details on the trade activities for Brazil’s Tupi crude delivered to China are expected, following indications that trades could have been done at lower premiums, spurring demand for the grade from Chinese buyers.

**Deals for US WTI Midland crude to Asia remained few and far between as Middle Eastern crude grades were favored by the Asian buyers due to competitive prices.
Crude futures

** Crude oil futures enter the week on the back of a surprise decision by the OPEC+ alliance to loosen its production quotas. The decision, reached during the April 1 meeting, will see the producer group raising its collective output by 350,000 b/d in May, another 350,000 b/d in June, and 441,000 b/d in July. OPEC+ ministers are planning to meet again April 28 to review their decision, before the first increment goes into effect in May.

**Saudi Arabia, which is currently in the middle of an additional 1 million b/d cut, will also ease the cut by 250,000 b/d in May, 350,000 b/d in June and 400,000 b/d in July, respectively.

** Meanwhile, concerns remain in the market over the uneven recovery in crude demand, as hopes of an expedited economic recovery in the US are tempered by the progression of the pandemic in other parts of the world, including Europe and India.

** The market lost further support as shipping flows through the Suez Canal resumed and the prospect of global oil disruptions eased, after the Ever Given container ship was refloated.

** Despite the OPEC+ decision to increase output, and lingering concerns on the demand-side of the equation, in the week ended April 1, the June contract for Brent had edged 0.67% higher lower to $64.86/b, whereas the May contract for NYMEX light sweet crude rose 0.79% to $61.45/b.
Source: Platts