Asia crude oil: Key market indicators May 31-June 4

The crude oil market in Asia was lower at the start of the week of May 31 as oil prices fell overnight May 28 on expectations that the OPEC+ will press on with its scheduled increase in production quotas during a June 1 meeting, despite the prospect of a restoration of the Joint Comprehensive Plan of Action, or JCPOA, which could see the influx of Iranian barrels into the market.

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ICE August Brent crude futures were pegged at $68.92/b at 0200 GMT May 31, 34 cents/b lower from the 0830 GMT Asian close on May 28.

Middle East crude

** Market participants await the OPEC+ meeting on June 1 and the issuance of official selling prices by Middle Eastern crude producers as trades for August-loading barrels commence in the week started May 30.

** Middle Eastern oil producers are expected to ease oil cuts despite the imminent return of Iranian crude oil and the spread of the pandemic across several Asian countries.

** OSPs for lighter crude grades are expected to be raised given the stronger demand and strengthening of the sour complex compared with last month. The outlook for medium and heavy grades remained mixed amid weaker product cracks for middle distillates and fuel oil.

** The Dubai cash/futures (M1/M3) spread averaged $1.13/b in the week ended May 29 against $1.37/b in the week ended May 22.

** Intermonth spreads were wider during midmorning trade May 31, with July/August pegged at 50 cents/b, up 2 cents/b from the Asia close May 28.

** July Brent/Dubai Exchange of Futures for Swaps, or EFS, spread was pegged at $3.02/b in midmorning May 31, unchanged from the Asia close May 28.

Asia-Pacific regional crude

** Market participants are looking to ascertain the trade details for Indonesia’s TPPI tender for August delivery.

** A fresh trading cycle for Far East Russian grades commences in the week started May 30, with market participants waiting for tenders for August-loading barrels.

** Participants are eying any further trades for Malaysian crude following a July-loading cargo of Labuan sold by Western trading house Trafigura to an end-user at a premium of around mid $1s/b to Dated Brent, FOB.

** For the heavy sweet crudes, traders will seek more clarity on tender and trade activities for Sudan/South Sudan’s July loading Nile Blend and Dar Blend. Trade details for July-loading cargoes of Australia’s Vincent crude will be in focus amid weaker fuel oil product cracks.

** On the regional OSPs, market participants will be awaiting the May Malaysian Crude Oil prices, Brunei’s March and April OSPs and Indonesia’s May Indonesian Crude Prices in the week.

Delivered crude

** Market participants will be keeping a lookout for potential trades on August-arrival Brazil’s Tupi crude in the week started May 30 amid a wide bid-ask spread for the Asian market.

** Following Taiwan’s CPC Corp.’s procurement of US WTI Midland crude for August delivery at higher cash premiums on the month, traders will be looking to see if the traded level can sustain amid a wide Brent-Dubai EFS, with refiners favoring Dubai-linked crude grades over Brent-linked ones.

Crude futures

** Despite existing plans to relax oil output quotas by 700,000 b/d and 840,000 b/d in June and July, respectively, the resurgence of the pandemic in Asia and the prospect of the restoration of the JCPOA will weigh on the minds of ministers, delegates told S&P Global Platts.

** The market is closely following the ongoing fifth round of talks over the JCPOA in Vienna. Mikhail Ulyanov, Russian envoy to the UN, in a comment on Twitter May 30 said negotiators are proceeding with an understanding that the current round of talks are final. S&P Global Platts Analytics estimates that if a framework deal is reached before Iran’s June 18 presidential election, sanctions relief for Iran could bring about 1.05 million b/d of crude supply into the market between May and December.

** In the week ended May 29, the August contract for ICE Brent futures rose 3.57% on the week to settle at $68.72/b May 28, whereas the July contract for NYMEX light sweet crude rose 4.31% at $66.32/b. The rise in oil prices came as strong economic indicators from the US, UK and other Western economies augured robust oil demand during the summer season.


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