Asia crude: Key market indicators this week

Singapore — Asia's crude oil market continued to surge above $70/b at the start of the week March 8-12, after Saudi Arabia's energy ministry reported a drone attack by Iranian-backed Houthi rebels from Yemen on the morning of March 7, that hit a petroleum storage tank at the Ras Tanura port.

May ICE Brent crude futures was pegged at $71.17/b at 0300 GMT March 8, $3.50/b higher from the 0830 GMT Asian close on March 5.

MIDDLE EAST CRUDE

**The week commences with the issuance of official selling prices by Middle East producers. Saudi Aramco issued OSPs for April with a hike for its Light and Medium crude grades bound for Asia, while leaving prices for its Heavy crude unchanged. Other producers are set to announce their respective OSPs soon after Aramco.

**Following the OPEC+ announcement, Asian buyers will continue to watch the rise in oil prices amid tightening supplies, although maintenance in some countries could see muted spot buying in the month ahead.

**A wide front month Brent-Dubai Exchange of Futures for Swaps is expected to keep arbitrage threats against Middle East crude grades muted in the near term. West African cargoes may be further discounted as these grades attempt to find a home amid a supply overhang.

**Dubai cash-futures, or M1-M3, averaged $1.31/b in the week ended March 5, against 49 cents/b in the week ended Feb. 26.

**Intermonth spreads widened during morning trade March 8 with May-June pegged at 86 cents/b, up 10 cents/b from the Asian close on March 5.

**May Brent-Dubai Exchange of Futures for Swaps was pegged at $2.91/b during early Asian trade March 8, up 38 cents/b from the March 5 Asian close.

ASIA PACIFIC CRUDE

**The sweet crude market expects results of Pertamina's May 10-21 buy tender to be announced this week, which may help to cushion the downtrend in North West Shelf condensate premiums to Platts Dated Brent assessments amid weaker demand from the petrochemical industry.

**Traders anticipate the results for India's OVL's Far East Russia's Sokol tender for May 13-19 loading, which closes on March 10. Sentiment for Sokol remains upbeat amid lower Middle Eastern crude production, with the last trade for April 27-May 3 loading heard done at a premium of $2.50-$2.60/b to Platts front month Dubai assessments, CFR Yeosu.

**The market will be on a lookout for remaining Malaysian crude cargoes for April loading, with talks indicating that April loading Labuan could have traded higher following an earlier deal heard done at a premium of $1.80/b to Platts Dated Brent assessments, FOB.

**Following PV Oil's offer for May 1-7 loading Dai Hung crude in a tender which closes later this week, market participants will be looking out for the remaining PV tenders this week.

**Fresh tenders or trades for Sudan/South Sudan's Dar Blend and Nile Blend are also expected and their premiums to Platts Dated Brent assessments may edge lower on the month amid weakening fuel oil crack spreads.

DELIVERED CRUDE

**In the Asia delivered crude market, traders are looking out for any fresh deals for Brazilian Tupi crude following a trade heard done by Shell for a May delivered Tupi cargo at a premium of $2.50/b ICE Brent, DES Qingdao to a Chinese end-user. Indicative offers for June arrival cargoes, however, remain largely stable on the month at a premium of around $3/b over ICE Brent, DES Qingdao.

**Market participants will also be keeping a lookout for the delivered price movements of US WTI Midland crude, which may be caught in a range after stronger premiums for alternative light crude grades from Middle East and Asia Pacific were heard.

CRUDE FUTURES

**Crude oil prices are expected to continue their rally this week, as a drone attack on a petroleum storage tank at Saudi Aramco's Ras Tanura port ignited fears over disruptions in global oil supply. The market is also seen supported by the OPEC+ decision to keep production quotas largely steady in April, as well as general optimism over declining COVID-19 infections and improving economic conditions globally.

**The OPEC+ alliance had decided to keep production quotas largely steady for the month of April, with Saudi Arabia also extending its unilateral 1 million b/d output cut indefinitely. Only Russia and Kazakhstan were granted 130,000 b/d and 20,000 b/d increases in their production quota, respectively.

**The OPEC+ decision meant that despite an improving demand outlook, up to 8 million b/d of OPEC+ production -- or roughly 8% of pre-pandemic supply -- will remain off the market for at least another month. As a result, the Brent and NYMEX light sweet crude markers, despite starting last week on a tepid note, hurtled 7.67% and 7.46% higher during the week to settle at $69.36/b and $66.09/b respectively on March 5.