Asia crude - Key market indicators this week

Singapore — The crude oil market in Asia started the week of July 13 weaker, amid reports that the OPEC+ alliance will stick to its timeline of paring back its landmark production cuts in August to 7.6 million b/d, from 9.7 million over May-July.

September ICE Brent crude futures was pegged at $42.83/b at 0230 GMT on July 13, down 37 cents/b from the Asian close on July 9.

MIDDLE EAST CRUDE

**September Dubai crude futures was pegged at $42.17/b on the morning of July 13, down 23 cents/b from $42.40/b at the Asian close on July 9.

**Intermonth spreads were relatively steady, with August/September pegged at plus 27 cents/b, and September/October at plus 9 cents/b. This compares to 26 cents/b for August/September and 10 cents/b for September/October at the Asian close on July 9.

**September Brent/Dubai Exchange of Futures for Swaps was pegged at 66 cents/b on July 13, down from 80 cents/b at the Asian close on July 9.

**Middle East allocations are expected to kick off in the week starting July 13, following the release of August official selling prices by major producers, including Saudi Aramco, Abu Dhabi National Oil Company and Qatar Petroleum in the week ended July 10.

**Asian crude refiners will be running their fresh linear programming models before more spot trading for September-loading cargoes begins. The market remains on the lookout for the key Al-Shaheen tender for September-loading cargoes.

**The Dubai cash/futures spread is likely to remain supported following producer hikes for August OSPs, with the spread averaging $1.14/b for July so far, higher than the 84 cents/b average for the whole of June, and the highest since January 2020.

ASIA PACIFIC CRUDE

**Market participants would be looking out for results from Indian ONGC's sell tender for September-loading Sokol crude, which would set the precedence for the trading cycle of middle distillate-rich crudes.

**The outcome of Vietnamese crude tenders, including for September-loading Ruby and Chim Sao, will also be keenly watched for clues on price trends in the regional market.

**Loading programs of Australian grades, including Cossack, Kutubu and Vincent, and Malaysian Kimanis crude, are largely expected in the week beginning July 13.

**Market participants will be looking out for spot trades of September-loading Australian North West shelf condensate, with traders expecting higher cash differentials for the September trade cycle, given tight supply and stronger naphtha margins.

DELIVERED ASIA CRUDE

**Offer levels for October-delivered Brazilian Lula crude have been easing amid sluggish demand from Chinese end-users.

**Latest offers for Lula DES China reported at December ICE Brent futures contract plus high $2s/b.

CRUDE FUTURES

**Prices expected to remain rangebound with near-term risks skewed to the downside, as positive supply-side factors provide key support while further gains are limited by rising COVID-19 case counts in the US.

**The prompt intermonth timespread for Brent swaps remained firmly in contango, averaging minus 17 cents/b in the week ended July 10, wider than the minus 10 cents/b the week ended July 3.

**The US Energy Information Administration expects domestic output to average 11.63 million b/d, global oil demand to shrink by 8.15 million b/d and Brent to average $40.50/b in 2020.

**Market participants will be looking to the OPEC+ Joint Ministerial Monitoring Committee meeting on July 15 for further confirmation on whether the current record 9.7 million b/d production cut agreement will not be extended into August.