Asia crude - Key market indicators this week

Singapore — The crude market in Asia started the week lower mid-morning June 22 with the majority of the remaining spot trading activity for August-loading crude cargoes in both the Middle East and Asia Pacific expected to conclude this week.

August ICE Brent crude futures stood at $42.33/b at 0200 GMT June 22, down 46 cents/b from $42.79/b at the 0830 GMT Asian close on June 19.

MIDDLE EAST CRUDE

**August Dubai derivative fell 47 cents/b from the Asian close on June 19 to around $41.39/b on the morning of June 22, tracking global crude oil prices.

**Intermonth spreads were also lower mid-morning June 22 with the July/August spread pegged at 27 cents/b backwardation and the August/September spread pegged at 5 cents/b backwardation. This compares to 39 cents/b for July/August and 10 cents/b for August/September at the Asian close on June 19.

**Brent/Dubai Exchange of Futures for Swaps was pegged at 94 cents/b at mid-morning June 22, largely steady from the 93 cents/b at the Asian close on June 19.

**Middle East crude cargoes will continue to trade during the week of June 22 with Asian buyers expected to wrap up their purchases of August-loading cargoes by the end of the week.

**Light sour crude market would be keenly watched after Abu Dhabi's Murban crude barrels were reportedly sold for prompt loading from a floating storage last week.

**Key Middle East sour crude market indicator, the Dubai cash/futures spread, was firmly in backwardation for the third consecutive week with the spread averaging 97 cents/b for the week ended June 19, up from 76 cents/b the prior week.

**The spread climbed for four consecutive days from June 15 to peak at a four-month high of $1.31/b on June 18, after it was heard that Asian term lifters had received allocation cuts from Middle East producers, Saudi Aramco and Iraq's State Oil Marketing Organization.

**For the month to-date, the spread averaged 71 cents/b -- the highest since early-February, and significantly higher than the May average of minus $2.73/b.

ASIA-PACIFIC CRUDE

**Traders will be looking for the results of Indian ONGC's tender for Russian Sokol crude on June 22 to see if the strength seen in the initial tenders continue to hold through the end of the month as well.

**Tender results of Malaysia's Bunga Kekwa and Bunga Orkid are due on June 22 with traders expecting prices in the mid-$3s/b range to Platts Dated Brent on a FOB basis.

**Market participants will be looking out for spot trades of Australia's Vincent crude with latest offers for August-loading cargoes reported at Dated Brent plus around $7/b on an FOB basis.

DELIVERED CRUDE MARKET

**In the delivered crude market, participants would be looking for September spot trades of delivered Brazilian Lula crude, with latest bids and offers reported at premiums of around high-$2s/b and mid-$3s/b, respectively, against November ICE Brent Futures on a DES basis.

**There were some expectations, however, that the Chinese independent refiners may not buy any Brazilian crude for the week beginning June 22 amid weak domestic margins and sufficient cargoes purchased for July and August delivery.

**Traders would also be watching out for spot deals of September-delivery US WTI Midland crude for the week beginning June 22 with latest trade indications reported at premiums of close to $2/b to November ICE Brent Futures on a DES basis.

CRUDE FUTURES

**Sentiment steadies as investors continue to weigh recent bearish and bullish factors.

**Optimism sets in as OPEC+ stepped up compliance efforts on production quotas during a June 18 meeting.

**However, the risk of a resurgence in COVID-19 cases amid the easing of global lockdowns have posed a threat to demand recovery.

**Market structure for crude has meanwhile showed a recovery, with the prompt-month Brent swaps structure flipping into backwardation in the week ended June 19. The July-August Brent swaps timespread narrowed 16 cents/b day on day and flipped into a backwardation of 4 cents/b at the Asian close on June 19.