Asia crude: Key market indicators this week

Singapore —
The crude oil market in Asia was rangebound March 1 as participants awaited fresh cues going into the OPEC+ meeting later in the week.

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May ICE Brent crude futures were pegged at $65.569 at 0243 GMT March 1, steady from the 0830 GMT Asian close on Feb. 26.

Middle East crude

** The OPEC+ meeting on March 4, where the alliance is expected to discuss easing its oil supply curbs, will be the main focus of attention this week. Market participants expect the group to pare back the output curbs due to an increase in global oil prices in recent weeks.

** Traders are also awaiting the release of official selling prices for April by key crude producers, with most expecting an increase of 10-20 cents/b for lighter grades and steady to lower prices for medium and heavy grades, based on purchase patterns seen over the past month.

** Demand from Asia will also remain in focus amid expectations that India and China will increase import volumes in March from the month before. India’s IOC has issued a tender seeking West African and US crudes and ONGBV has issued a term tender offering 4 million barrels of Das Blend crude for April-December. The results of both tenders are awaited.

** Dubai cash/futures (M1/M3) averaged 49 cents/b in the week ended Feb. 26, narrowing from 89 cents/b the week before. For February, the M1-M3 spread averaged at a premium of 69 cents/b, compared with a premium of 48 cents/b in January.

** The front-month cash Dubai assessment averaged $60.86/b in February, up from $54.77/b in January.

** April cash Oman crude was assessed at $64.29/b Feb. 26, and averaged $60.92/b in February, up from $54.79/b in January.

** Intermonth spreads were steady during mid-morning trade in Asia March 1, with April/May pegged at 57 cents/b, up 3 cents/b from the Asia close Feb. 26.

** The May Brent/Dubai Exchange of Futures for Swaps was pegged at $2.57/b in mid-morning trade in Asia March 1, up 11 cents/b from the Asia close Feb. 26.

Asia-Pacific crude

** Procurement activities by Indonesia’s Pertamina will be closely watched this week to gauge the support it offers to ultra-light sweet condensate sentiment, where premiums for North West Shelf condensate may slip on retreating naphtha cracks.

** Trade details for an April-loading cargo of Australia’s Cossack were also being actively sought, as well as details for the two to three cargoes heard offered of Australia’s Ichthys condensate.

** The result of India’s OVL’s second Far East Russia’s Sokol tender for April 27-May 3 loading, which closed Feb. 26, was also strongly anticipated, following the first tender being awarded to Japan’s Idemitsu at a premium of $1.85/b to Platts front month Dubai assessments, CFR Yeosu earlier in February.

** The movement of Malaysian crude cargoes also remains in focus. An April-loading Labuan crude was heard to have traded by Trafigura to an end-user in Thailand at a premium of $1.80/b to Platts Dated Brent assessments, FOB, while ConocoPhillips was heard to have awarded its tender for an April-loading cargo of Kimanis crude at a premium in the mid-$2s/b to Dated Brent.

** Market participants will also be on the lookout for any fresh tenders or trades for Sudan/South Sudan’s Dar Blend and Nile Blend, for which premiums to Platts Dated Brent assessments, FOB, may edge lower on the month amid retreating fuel oil cracks. Premiums to Dated Brent for March-loading cargoes of Dar Blend were heard to have traded at around $4/b FOB to Dated Brent; February-loading cargoes had traded at slightly below $3/b FOB to Dated Brent.

** Traders are also expecting the release of Brunei’s January official selling price, Indonesia’s February Indonesian Crude Price and Malaysia’s February MCO OSP in the trading week starting March 1.

Delivered crude

* Traders were keeping watch for fresh deals for Brazilian Tupi crude emerging in the week amid largely stable production in Brazil, after a trade was heard by oil major Shell for a May-delivered Tupi cargo to an end-user in China at a premium of $2.50/b to ICE Brent, DES Qingdao.

** Delivered price movements for US WTI Midland crude were also being closely monitored, which may trend stable to lower amid tepid Asian buying interest, despite pockets of supply tightness in West Texas amid lower inventory levels.

Crude futures

** Analysts generally expect the OPEC+ alliance to agree to increase production from April at their March 4 meeting, but have cautioned that a large increase could spook markets and spur a downward price correction. Analysts also expect the meeting to be fractious, as some members remain conservative on supply while others may want to significantly increase output given the recent price rally.

** Analysts remain somewhat reassured by the demand outlook as coronavirus vaccinations commence in major economies, and expect the uptick demand to absorb any moderate increase in OPEC+ supply.

** The improved demand outlook was the main driver of the rally in oil prices seen in the week ended Feb. 26, even as uncertainty over the OPEC+ meeting stemmed the uptick late week. The May contract for Brent rose 3.67% week on week to settle at $64.42/b Feb. 26, while the April contract for NYMEX light sweet crude rose 3.78% to settle at $61.50/b.

** The market received some boost in the week to Feb. 26 from a sluggish restart in oil production in the southern US, where a polar vortex shut 4 million b/d of oil capacity at its peak in the week ended Feb. 19. Market analysts said that effects of the severe weather would be felt on supply for several weeks as producers carry out maintenance and repairs.

What does the new normal hold for Asian refiners? Gain access to industry leaders who will share their views on how the refining landscape is shifting and the sector is adapting.

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