Asia crude - Key market indicators this week

New York — The crude market in Asia saw the new trading cycle for July-loading Middle East cargoes commence Monday, while the Asia Pacific crude market wraps up its June-loading program.

July ICE Brent crude futures stood at $25.82/b at 0200 GMT Monday, down 23 cents/b from the 0830 GMT close in Asia last Thursday. Many Asian markets were closed Friday for Labor Day holidays.

MIDDLE EAST CRUDE

** July Dubai derivative was pegged at $28.22/b in mid-morning trade in Asia Monday, up 74 cents/b from Thursday's Asian close.

** Intermonth spreads were higher, with the June-July spread pegged at minus 89 cents/b and the July-August at minus 73 cents/b at 0200 GMT, compared with minus 98 cents/b and minus 84 cents/b, respectively, at the 0830 GMT Asian close Thursday. The Brent/Dubai Exchange of Futures for Swaps was pegged at minus $2.40/b Monday morning, compared with minus $2.41/b at the Asian close Thursday.

** With the June trading cycle concluded, Asian buyers of Middle East sour crude will spend the first week of May preparing July-loading requirements.

** Middle East producers will issue June official selling prices this week, with market participants expecting further cuts from last month, a preliminary survey showed.

** Dubai cash/futures spread averaged minus $9.15/b in April, widening sharply from minus $3.11/b in March. This points to a further heavy correction in official selling prices for Asia, although OSP direction could eventually be dictated by other factors, including OPEC+ dynamics or recovering demand in China.

ASIA-PACIFIC CRUDE

** In the condensates market, participants expect further downward pressure for Australia's North West Shelf condensate as an overhang from previous trading cycles will weigh on trading sentiment for July-loading barrels.

** With only one Labuan crude cargo among the key Malaysian crude oil grades transacted in the spot market, participants expect the OSP differential for Malaysian crude grades, which will be issued this week, to reflect the weakness in demand.

** The week will also see fresh tenders from ONGC offering July-loading Russian Sokol crude, with expectations for prices to remain bearish amid poor demand.

DELIVERED CRUDE MARKET

** Offer levels for August delivered WTI Midland crude have started to increase amid lower arbitrage flows from the US and higher freight rates. Market participants will be watching for any deals to be concluded.

** Offers for Brazilin Lula crude have been limited in the spot market amid higher freight rates, although improved demand from Chinese independent refiners could see deals being concluded this week, traders said.

CRUDE FUTURES

** The contango for Brent and WTI curves look set to ease marginally amid expectations of a gradual recovery in global oil demand.

** More countries will be easing lockdown measures even though re-openings are expected to take place in gradual phases.

** OPEC+ commenced the new production cut agreement May 1, but this was unlikely to provide a significant boost to crude prices.

** The lack of storage capacity remains a huge concern as the US is expected to run out of commercial crude storage from May.