Asia crude - Key market indicators this week

Singapore — The crude oil market in Asia started the Sept. 7 trading week lower as sentiment was weighed by skepticism over recent COVID-19 vaccine developments, as well as underlying weak demand fundamentals.

November ICE Brent crude futures were pegged at $42.24/b at 0200 GMT Sept. 7, sliding $2.01/b compared with $44.25/b at the Asian close on Sept. 4.

MIDDLE EAST CRUDE

**Volume allocations are expected to kick off this week after Saudi Aramco released October official selling prices over the weekend.

**Saudi Aramco had cut Asia OSPs between 90 cents/b to $1.50/b for different grades, which were largely in line with market expectations.

**Spot market differentials could recover following these cuts, but market sources said weak demand continues to weigh on the market.

**November cash Dubai was assessed at a 34-cent/b discount to November Dubai futures, edging 6.50 cents/b higher from the Asian close on Sept. 4, Platts data showed.

**However, intermonth spreads widened in mid-morning Sept. 7 trade from late last week. The October-November spread was pegged at minus 23 cents/b at 0200 GMT, widening 7 cents/b from the Asian close Sept. 4.

**The November Brent/Dubai Exchange of Futures for Swaps was pegged at 10 cents/b, stable over the same period.

ASIA-PACIFIC CRUDE

**In the condensates market, the November loading program for Australia's' North West Shelf condensate is expected in the week of Sept.7. With improving product margins, traders expect slightly better price differentials for November loading NWS.

**Qatar Petroleum is expected to issue its monthly sell tender for November loading low sulfur condensate and deodorized field condensate in the Sept.7 week. With only LSC issued for spot sale in August, market participants would be watching if both DFC and LSC are offered via tender this month.

**Traders will also be looking out for tender results from China's Fuhaichuang Petroleum and Chemical seeking condensate for November delivery in the week beginning Sept. 7. Previously, China's Fuhaichuang bought an unspecified volume of Alba condensates for October delivery, the seller and price details of which were not immediately clear, traders said.

**In the light crudes market, loading program details for Cossack and Kutubu Light crude will be released in the Sept.7 week, traders said. These grades could also trade marginally higher compared with the previous month's traded levels on account of better product margins, traders said.

**India's ONGC is expected to issue its sell tender for November-loading Russian Sokol crude in the week of Sept. 7. ONGC last sold October-loading Sokol at around parity to Dubai on a CFR basis, traders said.

**Sell tenders for November loading Vietnamese grades are also expected in the week of Sept. 7. With price differentials for October loading Vietnamese barrels having touched three-month lows in August, some traders expect there might be a slight rebound in September. Nevertheless, they cautioned against this as product margins for gasoil and jet are still weak.

DELIVERED ASIA CRUDE

**In the delivered crude market, some spot trades for December delivery Lula crude was reported at premiums of around 50-60 cents/b to February ICE Brent Futures on a DES Qingdao basis. Spot trades are expected to remain at around prevailing levels as demand from Chinese independent refiners remain sluggish with no fresh crude import quotas granted.

**Trading activity for delivered US WTI Midland crude also remained largely quiet with demand from Asia continuing to weaken, traders said. CPC Taiwan, a regular buyer of US WTI Midland did not award any WTI Midland for their November delivery purchase tender and valuations for the crude were reported at around mid to high-$1s/b to Platts Dated Brent, DES basis, traders said. Market participants would be looking out for fresh spot trades in the week of Sept. 7, they added.

CRUDE FUTURES

**Crude futures dropped sharply in the second half of the week ended Sept. 4, with front-month NYMEX WTI and Brent markers settling below their key support levels at $39.77/b and $42.66/b, respectively, on Sept. 4, nearly a two-month low.

**A drop in gasoline demand at the end of the US driving season, the start of scheduled maintenance at US refineries and a continued weakness in global refining margins contributed to a weak demand outlook in a highly uncertain macroeconomic environment amid rising global oil supply.

**Total refined product demand slid by more than 13% to 16.98 million b/d, while total finished motor gasoline supplied also fell 4.1% to 8.79 million b/d, US Energy Information Administration data released Sept. 2 showed.

**The prompt intermonth timespread for Brent swaps also became more bearish in the second half of the week, averaging minus 46 cents/b, and wider by 9 cents/b compared with 37 cents/b in the first half of the week ending Sept. 4.

**Analysts expect Brent crude futures could trend lower in the coming weeks after trading in a tight $43-$45/b range over the past two months.