Asia's crude market holds on to China hopes in morning trade amid WTI collapse

Singapore — Outright prices and intermonth spreads for benchmark Dubai crude futures edged lower in mid-morning trade in Asia Tuesday, but were largely rangebound despite NYMEX WTI June futures plunging by more than 25% in overnight trading.

The June Dubai futures contract was pegged at $24.83/b at 11 am in Singapore (0300 GMT), down 77 cents/b or 3% from the $25.60/b assessment at Monday's 0830 GMT Asian close.

Comparatively, NYMEX June WTI was down 27% over the same period. The contract had been assessed at $14.75/b at 0830 GMT Monday and was pegged at $10.77/b at 0300 GMT Tuesday.

The contract lost 25% of its settlement value between Friday and Monday after a key ETF trader announced it would exit all June positions, triggering a marketwide selloff during US trading hours.

Intermonth spreads for Dubai futures were slightly lower Tuesday than Monday's close. The May/June Dubai futures spread was pegged at minus $2.85/b at 0300 GMT, down 19 cents/b from minus $2.66/b assessed at 0830 GMT Monday. The June/July spread dipped 26 cents/b over the same period to be pegged at minus $1.35/b at 0300 GMT Tuesday.

Middle East sour crude futures shrugged off the selloff as traders in Asia focused on rebalancing hopes for the coming weeks.

"Market seems to be picking up now with China buying," a crude trader in Singapore said.

Demand from China, which remains a step ahead of the global COVID-19 curve, is Asia's main buy-side cue for market recovery, according to traders.

China's throughput in April is likely to recover 8% to 12.8 million b/d from March as both state-owned and independent refineries lift their utilization rates amid good domestic margins, a monthly S&P Global Platts survey showed last week.

Although activity in the June spot market has quietened down this week, participants in Asia are hopeful the upcoming July trading cycle will move Middle East crudes closer to rebalancing.

Several OPEC+ members and suppliers of sour crude in Asia are indicating they are cutting production in coming weeks. Oman said Monday it will cut oil production by around 201,000 b/d for the next two months, with a production quota of 682,000 b/d. The sultanate is the largest producer in the Persian Gulf that is not a member of OPEC, but is a member of the OPEC+ alliance.

Around 70%-80% of Oman's exports flow into China every month, and the cut will likely to spur buyers to seek alternate crudes from the Middle East spot market.

Kuwait - a member of OPEC - said last week it has begun ramping down production. Under the latest deal, Kuwait's production quota for May and June is 2.168 million b/d.