Trade in the Asian crude oil market is likely to kick off on a cautious note for the week beginning Feb. 1, after spot differentials for Middle East grades pointed to bearish demand-supply fundamentals in the recently concluded January trading cycle.
After months of consecutive gains, differentials for benchmark Dubai assessments weakened in January, as poor Chinese demand and increasing arbitrage inflows sharply eroded premiums for grades such as Oman Export Blend and Far East Russian ESPO crude.
Middle East crude
** Asian demand for the April-loading trading cycle is likely to be the focus for this week, after sluggish buying in January as rising COVID-19 cases curbed crude and product demand and pushed refineries to opt for downtime as their margins shrank.
** Next cycle of Middle East official selling price issuances is likely to begin late this week. With easing of demand for Middle East crude supported by Saudi Arabia’s supply cuts, and falling premiums for Dubai, Middle East producers may be under pressure to cut prices this cycle.
** Dubai cash/futures (M1/M3) for January averaged at a premium of 48 cents/b against 56 cents/b in December.
** Intermonth spreads were steady during morning trade Feb.1 with April/May pegged at 36 cents/b, unchanged from the Asia close Jan. 29.
** April Brent/Dubai Exchange of Futures for Swaps was pegged at $1.14/b at the Asia open Feb.1, up 3 cents/b from the $1.11/b at the Asia close Jan. 29.
Regional Crude
** Asian crude oil market will await cues for light sweet condensate premiums from Indonesian Pertamina’s tender results. A March 22–April 21 arrival tender from Pertamina may have been canceled and replaced by another tender with April 10-26 delivery.
** Traders will closely watch tender results for Bunga Orkid and Bunga Kekwa this week. Malaysia’s MCO OSP and Brunei’s December OSP may also be issued this week…
