Asia crude market mulls uncertainty after negative WTI episode

Singapore — Benchmark Dubai crude futures dipped in mid-morning trading in Asia Tuesday, tracing global oil markets lower after the prompt May NYMEX WTI crude futures flipped into negative territory for the first time ever Monday night.

At 11 am in Singapore (0300 GMT), the June Dubai futures contract was pegged at $29.76/b, down from $30.94/b assessed at Monday's close in Asia.

Inter-month spreads also stepped lower Tuesday morning, with the May/June spread weakening to minus $3.62/b as of 11 am Singapore time. It was assessed at minus $3.26/b at 4:30 pm Singapore time on Monday.

The crude market in Asia took note of the unexpected WTI move, while also evaluating any cascading effect on crude flows in the East, market participants told S&P Global Platts.

"WTI on everyone's lips," said a North Asian refinery-linked source.

But as the initial shock of seeing negative crude prices wore off, traders shrugged off the move as having negligible impact on physical crude trade in Asia, particularly for Dubai and Brent-linked barrels flowing in the East.

"It's just that negative oil sounds really bad, everyone just trying to make sense of it all," said one crude broker Tuesday morning.

"It was quite unexpected, but also expiry so most people are looking at June WTI for a clearer indication of the market," he added.

NYMEX May WTI settled at minus $37.63/b, down $55.90 from Friday. The contract has never before traded in negative territory, and the previous record low front-month settlement was $10.42/b on March 31, 1986.

The selloff was "all related to the expiration," Platts Analytics senior consultant Sergio Baron said. There is "no space in Cushing and low open interest," he added. "WTI is deliverable via exchange, so a long futures contract with no space doesn't have other alternative to sell."

At 11 am in Singapore Tuesday morning, the contract was in positive territory again, being pegged at $1.35/b, Platts data showed.

ADNOC allocations

Meanwhile, Middle East sour crude traders said they are awaiting the confirmation of monthly crude volumes from Abu Dhabi National Oil Company this week.

ADNOC's nominations for May-loading cargoes are yet to be finalized, while those by Saudi Aramco and Iraq's SOMO were wrapped up earlier this week.

Term lifters and equity holders for ADNOC's four crude grades may see some volumes cut for May, as the emirate scales production back from current levels at around 4.1 million b/d as part of the new OPEC+ production cut agreement.

Depending on if and how much volume is cut for May loading, spot market differentials of ADNOC grades could see some support, said traders.

Currently, OSP-linked price differentials for June-loading cargoes are being quoted in discounts ranging from minus $1/b to minus $2/b for Murban, Das Blend, Umm Lulu and Upper Zakum, according to various market sources.

Most recently, BP sold a June-loading cargo of Murban to Unipec at a discount of $2/b under the OSP.

Das Blend equity holder Total was also reportedly offering a June-loading cargo of the light sour grade at a discount of around $1.50/b under the June Das OSP, according to market participants.