Asia crude oil: Key market indicators this week

Trade activity in the Middle East crude oil market in the week of June 7 is likely to pick up pace as the August-loading trade cycle commences, and market sentiment supported by the prospects of tight supply this trading cycle.

August ICE Brent crude futures were pegged at $71.55/b at 0200 GMT June 7, 18 cents/b lower from the 0830 GMT Asian close on June 4.

MIDDLE EAST CRUDE

**Activity in the week ahead will focus on issuance of official selling prices from Middle East producers Qatar Petroleum, Iraq's SOMO and Iran's NIOC.

**Last week, Saudi Aramco had issued OSPs for Asia-bound July crude with a hike of 10-50 cents/b for its light and medium crudes while cutting the price of its heavy crude by 10 cents/b.

**Abu Dhabi National Oil Co., or ADNOC, issued its OSPs based on the Murban Futures contract trading on the ICE Futures Abu Dhabi exchange. The price for Murban was set at $66.70/b. The July OSP differentials for Umm Lulu and Das Blend were unchanged from June at 5 cents/b and 35 cents/b, respectively, while differential for Upper Zakum was lowered by 10 cents/b to a discount of 50 cents/b to the Murban price.

**China's Rongsheng issued a term tender last week ended June 4 seeking 500,000-1 million barrels of Middle Eastern or US crude for delivery over September-December 2021. The refiner was heard to have bought Murban crude but this could not be immediately confirmed.

**Indian Oil Corp. bought around 2 million barrels of Nigerian crude for loading in August through a tender. MRPL bought, also via tender, 650,000 barrels of July-loading US crude.

**Dubai cash-futures, or M1-M3, averaged $1.51/b in the week ended June 4, against $1.13/b in the week ended May 28. On June 4, August cash Dubai was assessed at a premium of $1.75/b to same-month Dubai futures, the highest since Jan. 31, 2020 when it was assessed at a premium of $1.92/b.

**Intermonth spreads were lower during mid-morning trade June 7 with August-September pegged at 53 cents/b, down 1 cent/b from the Asia close June 4.

**August Brent-Dubai Exchange of Futures for Swaps was pegged at $3.32/b mid-morning June 7, down 7 cents/b from the Asia close June 4.

ASIA-PACIFIC CRUDE

**Market participants expect the August loading program for Australia's North West Shelf condensate and Indonesia's TPPI condensate tender for August-September delivery to be announced this week.

**Tenders for Qatar's DFC and LSC will be in focus following a widening Brent-Dubai EFS and stronger demand from Northeast Asian refineries post-turnaround.

**Traders are keeping a lookout for India's OVL's Sokol tender this week. Cash premiums for Sokol crude could remain resilient amid a wide Brent-Dubai EFS.

**Traders are looking to evaluate the impact of recovering naphtha cracks on condensates and light crude grades.

**Traders are also watching out for the August loading program for Malaysian crude and tender activity from PetroVietnam Oil. Cash premiums for regional grades are expected to remain firm amid limited supply despite an uptick in COVID-19 cases in the region.

**Traders are looking to ascertain the tender results for Sudan/South Sudan's July loading Dar Blend, where sentiment remains firm following resilient fuel oil cracks.

**Market participants are awaiting issuance of Brunei's March/April OSP and Indonesia's May ICP this week.

DELIVERED CRUDE

**Market participants are keeping a lookout for fresh trades on September arrival Brazil's Tupi crude, after offers dipped following thin Chinese buying interest.

**Asian buyers could prefer Dubai-linked crude grades over US WTI Midland crude amid a wide Brent/Dubai EFS.

CRUDE FUTURES

**This week, investors will navigate supply-side uncertainty after OPEC+ failed to provide any guidance on output increases for August onwards, when global oil demand is expected to rise even further. The coalition, which met on June 1, pressed on with initial plans to increase its production by 840,000 b/d July onwards, but beyond August, the OPEC+ supply accord calls for quotas to be held steady through April 2022.

**With oil demand in Asia expected to pick up in Q3, and with demand in the US and Europe already on an uptrend, analysts believe that continued OPEC+ restraint could lead to a significant undersupply in the market. Concerns over tight supply pushed oil prices to multi-year highs in the week ended June 4, with the August contract for ICE Brent crude futures rising 4.61% on the week to settle at $71.89/b on June 4, and the July contract for NYMEX light sweet crude rising 4.98% to $69.62/b.

**Investors will be eagerly anticipating OPEC's June Oil Market Report, due to be released on June 10, and the IEA's oil market report, due to be released June 11, to get a better sense of supply and demand cues.