Asia crude - Key market indicators this week

Singapore — The crude oil market in Asia started the week of Oct. 5 slightly higher, on optimism over US President Donald Trump's prognosis after he was tested positive for the coronavirus on Oct. 2.

December ICE Brent crude futures was pegged at $39.84/b at 0200 GMT Oct. 5, up 16 cents/b from the Asian close on Oct. 2.

MIDDLE EAST CRUDE

**The sour crude market awaits the release of fresh November OSPs in the week starting Oct. 5.

**Dubai cash-futures, or the M1-M3 spread, fell 18 cents/b day on day to a discount of 90 cents/b at the 4:30 pm (0830 GMT) Singapore close on Oct. 2.

**Oversupply concerns reemerged amid reports of increased production by OPEC+ members such as Russia and Iraq.

**Asian demand for Middle East crude is expected to remain steady from the previous trade cycle as poor refining margins continue to cap appetites.

**Prompt intermonth spreads were rangebound from the Oct. 2 Asian close. The November-December spread was pegged at minus 37 cents/b at 0200 GMT Oct. 5, widening 3 cents/b from the Asian close.

**The prompt December Brent-Dubai Exchange of Futures for Swaps was pegged at 1 cent/b mid-morning Oct. 5, narrowing 12 cents/b over the same period.

ASIA-PACIFIC CRUDE

**In the condensate market, traders will be looking out for fresh December loading programs, including Australia's North West Shelf condensate during the week beginning Oct. 5. With product margins looking strong, market participants expect price differentials for December loading condensates to be steady, although downside risks remain considering weak downstream demand and lesser buying appetite towards the end of the year.

**Market participants will be looking out for the outcome of Indian ONGC's first sell tender for December-loading Sokol crude which will close on Oct. 8. The outcome of the tender could set the precedence on how December-loading Far East Russian and regional middle distillate-rich crudes could trade. November-loading Sokol last traded at around parity to Dubai on a CFR basis.

**Fresh tenders offering Vietnamese crude for December loading could be issued by state-owned PV Oil in the week beginning Oct.5 as expectations are for price differentials to be largely steady month on month.

**Market participants will be looking out for official selling prices of August-loading crude from Brunei and September-loading crudes from Indonesia this week.

DELIVERED CRUDE

**Spot trade activity has been thin for US WTI Midland crude delivered into Asia amid slow demand. Valuations for December delivery crudes were last reported at around mid- to high-$1s/b to Platts Dubai on a DES basis.

**As for the Brazilian Lula crude, offers for January delivered crude were heard at a premium of around 50 cents/b to March ICE Brent Futures on a DES basis. Market participants would be waiting to see if there are any fresh crude import quotas allocated for Chinese independent refiners, which would in turn boost buying appetites.

CRUDE FUTURES

**Crude futures plunged in the week ended Oct. 2 after the December contract for Brent and the November contract for WTI dropped 7.4% and 8%, respectively, to settle at $39.27/b and $37.05/b on Oct. 2.

**The drop came despite the US Energy Information Administration reporting that US crude inventories dropped 1.98 million barrels to 492.43 million barrel in the week ended Sept.25, and that US distillate inventories had also dropped 3.18 million barrels in the same week despite a 1% increase in refinery utilization to 75.8% of refining capacity.

**The prevailing bearish sentiment was attributed to growing pessimism that a new stimulus package will not be approved in the US after the speaker of the US House of Representatives Nancy Pelosi said that the Republicans and Democrats were a long way away from reaching an agreement. Hopes of fiscal stimulus, which was expected to accelerate US economic recovery and boost oil demand, had been buoying the markets during the preceding weeks.

**Demand outlook for oil remains weak as fears of renewed lockdown restrictions have emerged after a second wave of the coronavirus pandemic hit Europe and after the rate of positive coronavirus cases tripled in New York City.

**Supply side concerns have also heightened as Libyan oil production has picked up pace after the lifting of an oil embargo, and as other OPEC+ members such as Russia and Iraq have increased their production. The OPEC+ alliance already has 2.375 million b/d of compensation cuts due to make up for prior overproduction, according to a document seen by Platts.

** Amid unsupportive oil fundamentals, the trajectory of crude futures this week will be tethered to news of the progress of the coronavirus pandemic and to the status of the US stimulus package.