Asia crude - Key market indicators this week

Singapore — The crude oil market in Asia started the week of Oct. 12 lower, as sentiment was weighed by reports on Oct. 11 that Libya's state-owned National Oil Corp. had lifted the force majeure on Sharara, the country's top producing oil field.

December ICE Brent crude futures was pegged at $42.53/b at 0300 GMT Oct. 12, down 68 cents/b from the Asian close Oct. 9.

MIDDLE EAST CRUDE

**Key Middle East crude tenders, such as Qatar's Al-Shaheen crude tender, are expected to be issued this week following the release of November official selling prices by Saudi Aramco and ADNOC.

**Sentiment is expected to improve slightly as refining margins, particularly for light distillates, showed some signs of recovery in recent weeks.

**The Dubai cash-futures, or M1-M3, spread rose slightly to a discount of 82 cents/b in the week ended Oct. 9, compared with a discount of 94.50 cents/b in the week of Oct. 5, Platts data showed.

**Intermonth spreads were rangebound during mid-morning trade Oct. 12 from late last week. At 0300 GMT Oct. 12, both the November-December and December-January timespreads were pegged at minus 30 cents/b, widening by 4 cents/b from the minus 26 cents/b assessed for both at the Asian close on Oct. 9.

**The December Brent-Dubai EFS was pegged at 21 cents/b at 0300 GMT Oct. 12, narrowing 11 cents/b from the Asian close on Oct. 9.

ASIA-PACIFIC CRUDE

**The condensate market was waiting for the outcome of Indonesia's Pertamina tender as all three North West Shelf condensate cargoes are available for December-loading, traders said, which can be offered into the tender, with cash differentials expected to rise on the back of better naphtha and gasoline margins.

**More lighter sweet crude grades are expected to trade this month as cash differentials are expected to be supported by better light distillate margins.

**Cash differentials for Russia's Sokol crude slumped following the conclusion of India's OVL tender. It remains to be seen if the cash differentials can pick up on the back of an improvement in middle distillate margins.

**Trade activity for December-loading Vietnamese and Malaysian crude is expected to kick off this week, with several PV Oil crude tenders seen concluding during the week.

DELIVERED CRUDE

**Trade activity for Brazilian Lula crude could pick up this week as Chinese traders returned to the market following the end of the golden week holidays. Offers for January delivered crude were last heard at around a premium of 50 cents/b to March ICE Brent Futures on a DES basis.

**Support for the US's WTI Midland due to hurricanes in the US Gulf Coast was met with lesser demand from key buyer South Korea, with traders noting that fundamentals for the grade remained somewhat balanced.

CRUDE FUTURES

**Crude futures will be on shaky ground this week, as the supply-side disruptions that had supported the market in the week ended Oct. 9 are coming to a resolution, and as the demand outlook remains bleak amid the resurgent coronavirus pandemic.

**Supply disruptions in Norway and the US Gulf of Mexico had provided the thrust that saw the December contract for Brent and the November contract for WTI surge 9.12% and 8.74% on the week to settle at $42.85/b and $40.60/b, respectively, on Oct. 9.

**Libya, which has ramped up its oil production to 300,000 b/d after the lifting of the Libyan National Army's oil embargo, may start producing yet more oil, as its state-owned National Oil Corp. said on Oct. 11 that it had also lifted the force majeure on Sharara - the country's top producing oil field -- capable of pumping out as much as 300,000 b/d of oil. More oil from Libya may further complicate the OPEC+ alliance's efforts to reduce supply in the market, as despite improved compliance in the month of September, the alliance currently has 2.375 million b/d of compensation cuts due for the rest of the year.

**Furthermore, the demand side of the equation is expected to see no improvement in the near term, as the rising number of coronavirus cases in many parts of the world threaten renewed lockdown restrictions, and as the political flip-flop over a US stimulus package further jeopardizes an already faltering US economic recovery.

**The US Energy Information Administration reported last week that US commercial crude inventories had jumped 500,000 barrels to 492.93 million barrels in the week ended Oct. 2, even as indications of improved downstream demand could be gleaned from data showing that US distillate inventories had fallen 960,000 barrels to 171.8 million barrels and US gasoline inventories had fallen 1.44 million barrels to 226.75 million barrels in the same week.