Asia crude - Key market indicators this week

Singapore — The crude market in Asia started the week higher mid-morning on June 1, with key Middle East official selling prices expected to be issued this week before trading activity for August-loading cargoes commence.

August ICE Brent crude futures stood at $37.63/b at 0200 GMT on June 1, up $2.31/b from $35.32/b at the 0830 GMT close in Asia on May 29.

MIDDLE EAST CRUDE

**August Dubai derivative rose $1.89/b from the Asian close on May 29 to around $37.46/b in the morning of June 1, tracking the uptrend in the futures market.

**Intermonth spreads were higher on June 1 with the July/August spread pegged at minus 18 cents/b and the August/September spread pegged at minus 37 cents/b, from minus 20 cents/b and minus 40 cents/b, respectively, at the Asian close on May 29.

**The August Brent/Dubai Exchange of Futures for Swaps was pegged at 17 cents/b in the June 1 morning, up from minus 25 cents/b at the Asian close on May 29.

**Buyers of Middle East crude in Asia will be on the lookout for various producers to announce official selling prices this week, as well as likely updates to production and export cuts.

**Last week, ADNOC told some of its customers it would be cutting volumes of all four of its crude grades by 5% over July.

**The ADNOC cuts were a continuation of its cuts for Umm Lulu and Das Blend from previous months, but a reduction for Murban and Upper Zakum, which saw volumes cut 20% over June.

**Meanwhile, market participants in Asia largely expect producers to hike prices this cycle, following a significant upward recovery in the Dubai M1/M3 spread, which averaged minus $2.73/b over May. The spread averaged minus $9.15/b over April.

ASIA-PACIFIC CRUDE

**The Asian sweet crude market will see the beginning of a new trading cycle for some of its grades this week, with market sources expecting last week's strength to ease as demand remains muted.

**This week, the regional crude market will be looking out for the official selling prices from Malaysia and Indonesia for their May loading cargoes.

**The August loading program for Australia's North West Shelf condensate program is also expected this week with one to two cargoes still unsold from the July loading program.

**In the Far East Russian crude market, market participants will be looking out for Indian ONGC's sell tender of August-loading Sokol barrels, particularly after the grade traded in premiums in May, for the first time in two months.

DELIVERED CRUDE MARKET

**With Indian Oil Corporation and CPC Taiwan in the spot market looking to buy August delivered US WTI Midland crude, more demand from Asian buyers for the US crude grade could emerge this week.

**For Brazil's Lula crude, there are expectations that sellers could reduce their offers for September-delivery cargoes heading to China as the buying appetite of Chinese independent refiners declined on the back of lower domestic product margins.

CRUDE FUTURES

**Investors are closely watching for developments in the US-China trade tensions, which could further hamper trade flows for oil and refined products.

**Indications of slowing US production and lower rigs help to provide a floor to prices.

**The contango for the forward crude curve structure has been largely steady in recent days amid signs of a slowing supply glut. Nonetheless, the fall in demand is unlikely to be balanced out in the near term.

**Market looks towards upcoming June OPEC+ meeting for clearer supply indications. Concerns revolve around whether Russia will increase production going into July.