Singapore —
The Asian crude oil market was trading lower at the start of the week ending Jan. 30, as rising coronavirus cases in the Asia-Pacific region and in Europe weighed on demand outlook.
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March ICE Brent crude futures was pegged at $55.25/b at 0300 GMT Jan. 25, down 7 cents/b from the Asian close Jan. 22.
Middle East crude
**Trade activity for March-loading cargoes is likely to ease in the week of Jan. 25, as the month draws to a close and purchases by Asian buyers near completion, although some prompt demand could emerge.
**The previous week saw demand for Middle East crude increase, with purchase tenders issued by key Asian economies namely India, China, Taiwan, Thailand and Japan. On the back of increased buying, spot differentials for various Middle East grades traded in premiums compared to steep discounts in the last few weeks.
**Outcome of India’s MRPL tender for high sulfur crude is awaited. The refiner issued a tender for purchase of one million barrels of March-loading crude, which will close Jan. 27 with validity until Jan. 29.
**The Dubai cash/futures (M1/M3) averaged 49 cents/b in the trading week ended Jan. 22, against 48 cents/b a week prior.
**Intermonth spreads narrowed during mid-morning trade Jan. 25, with the February/March pegged at 21 cents/b, compared with 22 cents/b at the Jan. 22 Asian close.
**March Brent/Dubai Exchange of Futures for Swaps was pegged at 86 cents/b mid-morning Jan. 25, up 5 cents/b from the 81 cents/b at the Asia close on Jan. 22.
Asia Pacific crude
**In the week that began Jan. 24, market participants will be focused on trade movement for the remaining March-loading barrels in the region, including Australia’s heavy crude Vincent. Gasoil cracks have eased slightly from earlier in the month and could put a cap to how much premiums could rise from the high-$9s/b premium against Dated Brent, FOB heard last month for February-loading barrels.
**For middle distillate-rich crude, market participants will be eying any further trades for Malaysian crude oil grades. March-loading Kimanis and Labuan crude oil barrels may have changed hands at premiums of around or below $2/b against Platts Dated Brent crude assessments, FOB as prices ease lower from last month amid ample availability and competition from arbitrage barrels.
**For condensates, demand and supply fundamentals are expected to remain largely stable for March loading cargoes, with talks indicating that most of the March-loading North West Shelf condensate cargoes could have changed hands. However, with more naphtha barrels expected to make inroads into Asia from the West, some traders cautioned that condensate premiums could face downward pressure in the coming weeks.
Delivered crude
**In the delivered crude market, sentiment for April-delivered Brazil’s Tupi cargo improved amid expectations of an uptick in demand from China post the Lunar New Year holidays, with value heard at June ICE Brent plus around $2s/b, DES Qingdao.
**On WTI Midland crude, Taiwan’s CPC has issued its monthly tender seeking sweet crude for April delivery. The tender closes Jan. 25 and is valid until Jan. 27. Last month, CPC was heard to have purchased 4 million barrels of March-arrival WTI Midland crude at a level below Dated Brent plus $2/b, on a delivered Taiwan basis, sources said. In addition, the refiner was heard to have purchased another 1 million barrel cargo of an undisclosed crude grade.
Crude futures
**Crude oil futures may show some weakness at the start of the week, as the Asian market digests data released from the Energy Information Administration on Jan. 22, which showed a 4.4 million-barrel build in US commercial crude inventories. The build was contrary to analyst expectations, which centered around a 2.5 million-barrel draw in inventories, and was also larger than the 2.6 million barrel-build reported by the American Petroleum Institute.
**Crude oil futures remained roughly steady during the week ended Jan. 23, as rising pandemic cases in Asia curbed any upside in the market despite stimulus expectations. The March contract for Brent ended the week 0.56% higher at $55.41/b, whereas the March contract for NYMEX light sweet crude ticked down 0.29% to $52.27/b.
**Market analysts said that fresh COVID-19 cases in China have raised fears that the country could suffer another debilitating wave of the virus, which could prove detrimental to oil demand. Already, Chinese authorities have called on citizens to avoid travel during the Lunar New Year holidays, which has soured market sentiment.
**Nevertheless, market analysts said that the oil complex remains supported by expectations that the Biden administration will push for further stimulus in the US, with US Treasury Secretary Janet Yellen also putting her weight behind the proposal.
**Furthermore, Saudi Arabia’s 1 million b/d output cut over February and March has also taken away some of the downside risk.
