Asia-Pacific medium sweet crude premiums to stay supported as cracks strengthen

Cash premiums for March-loading barrels of Asia-Pacific regional medium sweet crude are expected to remain supported due to tighter supplies and stronger cracks amid the new sanctions on Russia.

Sentiment heard for regional barrels scheduled for March loading was largely bullish, driven by strengthening middle distillate cracks, which were further bolstered by trade disruptions from the recent sanction clampdown by the US and UK.

This has caused upheaval in tanker freight rates and crude, as market watchers anticipate that refiners in China and India will seek alternative crude and product supplies.

"Sweet [barrels] are a bit distressed; regionals are holding up due to the backwardation and uncertainty," a trader said.

The March-loading trade cycle saw six 600,000-barrel cargoes of Malaysia's flagship Kimanis crude scheduled, up from five February-loading cargoes in the previous trading cycle, according to sources.

Petco is set to hold three cargoes for loading over March 9-13, March 20-24 and March 30-April 3. ConocoPhillips, the National Unitisation Secretariat (NUS) of Brunei and Shell are each set to hold one cargo for loading over March 4-8, March 14-18 and March 25-29, respectively.

It remains to be seen how many cargoes will enter the spot market as markets continue to evaluate the impact of sanctions from the week ended Jan. 10.

"People should reassess the effect of the sanctions, but sentiment [for regionals] should be stronger, like PG [Persian Gulf] grades," a second trader said.

Valuations for Malaysia's key export grade, Labuan crude, scheduled for March loading, were heard at a premium in the $7s/b to Dated Brent, FOB, compared with the previous trade heard for end-February loading, which was at a premium of around $7/b against the same benchmark.

"Globally, [it] feels tight. Medium [barrels are] all going up, especially sweet," a third trader said.

Meanwhile, the market is awaiting further pricing cues from the forthcoming results of PetroVietnam Oil's tenders, where the company offered 300,000 barrels each of Chim Sao, Ruby and Sao Vang and Dai Nguyet crude for loading over March 4-8, March 18-25 and March 10-16, respectively. The tenders closed Jan. 13, with validity until Jan. 16; Jan. 14, with validity until Jan. 21; and Jan. 16, with next-day validity, S&P Global Commodity Insights reported earlier.

The Platts-assessed second-month gasoil and jet fuel swap crack spread averaged $16.18/b and $14.96/b, respectively, so far in January, and stood at $16.21/b and $14.74/b, respectively, at the Jan. 14 Asian close, compared with December averages of $15.66/b and $15.12/b, Commodity Insights data showed.

Asian ultra-low sulfur gasoil premiums falter despite fresh Russian sanctions

The imposition of fresh sanctions on Russia's energy sector has boosted near-term market sentiment in the Asian gasoil complex, with market participants anticipating a reduced supply due to the sanctions.

The Platts-assessed front-month February-March gasoil swaps time spread rose to an 11-month high of $1.16/mt at the Jan. 13 Asian close, following the announcement of the sanctions, more than doubling from plus 53 cents/mt at the Jan. 10 close. The time spread was last higher Feb. 16, 2024, when the spread was at $1.37/mt, Commodity Insights data showed.

However, other market participants noted that the Russian sanctions will have a limited impact on physical gasoil cargoes, with freight costs being the main area affected.

"I would say shipping will be impacted the most ... Exporters will need to find alternative ships to deliver the cargoes," an Asia-based trader said.

Platts assessed the benchmark cash differential for 10 parts per million FOB Singapore gasoil cargoes at plus 78 cents/b against the Mean of Platts Singapore gasoil assessment Jan. 14, Commodity Insights data showed, down 14 cents/b from Jan. 13, when it had risen 7 cents/b day over day after the announcement of the Russian sanctions.

Thus far, the FOB Singapore 10 ppm sulfur gasoil cargo crack spread against the front-month cash Dubai has averaged higher at $16.72/b as of the Jan. 14 Asian close, compared with the December average of $15.68/b, the data showed.

"The destination of most Russian gasoil is Turkey and Brazil, so I assume the immediate impact on the spot market will be minimal," the trader added.