Asia crude oil: Key market indicators this week
Asia’s crude oil market entered the trading week starting May 3 on a cautious note as the easing of OPEC+ production cuts adds to supply while demand concerns remain high amid a resurgence of COVID-19 infections in several key Asian economies. July ICE Brent crude futures were pegged at $66.63/b at 0300 GMT May 3, down $1.10/b from the 0830 GMT Asian close on April 30.
** The week commences with eyes on the issuance of official selling prices by Middle East oil producers. Abu Dhabi National Oil Co. issued its OSPs for June after the launch of the IFAD Murban futures. The prices for the other ADNOC grades like Das Blend, Umm Lulu and Upper Zakum have been pegged at differentials to Murban.
** OSPs by other Middle East producers such as Saudi Aramco, Iraq’s SOMO and Qatar Petroleum are also due for release, with market participants anticipating cuts of around 10-20 cents/b.
** In the wake of the OPEC+ decision to ease production cuts, spot trading activity will be keenly watched in May as more oil is added to the market while key Asian economies such as India and Japan grapple with pandemic induced demand destruction.
** Dubai cash/futures (M1/M3) averaged 57 cents/b in the week ended April 30, against $1.02/b in the week ended April 23. For the month of April, the M1/M3 spread averaged at $1.04/b, down from $1.19/b in March.
** Intermonth spreads were steady during mid-morning trade May 3 with July/August pegged at 45 cents/b, unchanged from the Asia close April 30.
** The July Brent/Dubai Exchange of Futures for Swaps was pegged at $3.40/b at mid-morning May 3, unchanged from the Asia close April 30.
** Market participants are on the lookout for trade activity for a June-loading cargo of Australia’s North West Shelf condensate held by Mitsui, which remains sold amid scant demand.
** In the light sweet complex, traders will be evaluating the impact of recovering naphtha cracks on Australia’s Cossack and Papua New Guinea’s Kutubu Blend; trades for June-loading cargoes of the latter were heard at discounts of 30-45 cents/b to Dated Brent, FOB earlier in the June trading cycle.
** For the heavy sweet crudes, traders will look out for activity for Sudan/South Sudan’s May-loading Nile Blend and June-loading Dar Blend, where rangebound fuel oil cracks are keeping sentiment largely stable.
** Trade details for June-loading cargoes of Australia’s Vincent crude will be in focus following a deferment in its loading dates due to cyclone season, and amid steady fuel oil cracks.
** For regional official selling prices, market participants are awaiting the release of April Malaysian Crude Oil (MCO) prices, Brunei’s March OSP and Indonesia’s April Indonesian Crude Prices this week.
** A fresh trading cycle for Far East Russian grades commences this week, with market participants awaiting tenders for July-loading barrels.
** Market participants will be keeping a lookout for fresh trades in Brazil’s Tupi crude as demand fundamentals across Chinese independent refineries improve with more inquiries. Brazil’s Petrobras was most recently heard to have sold July-arrival barrels of the crude to a Chinese end-user at a premium in the mid-$1s/b to ICE Brent, DES Qingdao.
** A wide Brent/Dubai Exchange of Futures for Swaps continues to cast bearishness over delivered US WTI Midland crude to Asia, as cash premiums trended lower following CPC Taiwan’s procurement for July-delivery cargoes at premiums of 80-90 cents/b to Dated Brent, CFR.
** Crude oil futures enter the week sensitive to the trajectory of the pandemic situation in key Asian demand centers, particularly India. Analysts said preliminary data shows India’s gasoline demand falling to its lowest level since August 2020, with further downside a possibility.
** A lower-than-expected Manufacturing Purchasing Manager’s Index reported by China’s National Bureau of Statistics and a drop in eurozone gross domestic product reported by the Eurostat pushed oil prices lower April 30. Nevertheless, the July Brent contract was still up 2.05% week on week at $66.76/b, and the June NYMEX light sweet crude contract up 2.32% at $63.58/b.
** There was some bullishness in the market last week on an improving demand outlook in China, Europe and especially in the US, where stimulus-fueled economic expansion was boosting sentiment. The US posted an annualized growth rate of 6.4% for Q1, according to the Commerce Department. Energy Information Administration data showed that implied US oil products demand rose 8.7% in the week ended April 23 to 20.34 million b/d.