Regional sweet crudes' premium for Jan-loading soar amid tight supply

Spot premiums for regional sweet crudes from Malaysia and Vietnam have risen sharply for January-loading cargoes compared to the previous trading cycle amid tight supply availability even as middle distillate cracks cool off.

Brunei Energy's most recent tender offering a 600,000-barrel cargo of January-loading Kimanis crude was heard awarded to Thailand's PTT at a premium of around $1.10/b to January Malaysian crude oil, or MCO, official selling price, FOB, according to trade sources.

The traded level reflects over a doubling of spot premiums against OSP from last month, when Brunei Energy sold a similar-sized December-loading cargo to an end-user at a premium of around 50 cents/b to December MCO OSP, FOB, market sources said.

While market participants said it is difficult to gauge the traded level against the Platts Dated Brent benchmark -- which regional grades typically trade against -- most expect the value of the trade to be at a premium of around $6-$7/b against Platts Dated Brent crude assessments.

"Regional still pretty supported apparently, [trade] should be at least in the plus $6s/b [premium on a Dated Brent basis]," said a Singapore-based crude oil trader.

A key factor cited in the strengthening of premiums is the tighter spot supply of regional crudes, as majority of the cargoes in the Kimanis crude loading program were not made available for spot trading, and export tenders for Vietnamese grades thinned amid stronger domestic demand.

"Mainly due to tight supply... less Vietnamese and Malaysia cargoes," said a crude oil seller.

While the January-loading program of Kimanis crude consisted of eight cargoes, stable in volume on the month, only the cargo held by Brunei Energy was heard to have been made available in the spot market.

"No tender [from ConocoPhillips], all went to term," said a Singapore-based crude oil trader in reference to the mid-January loading cargo held by the company.

Malaysia's Petronas, which held four January-loading Kimanis cargoes, also does not currently have plans to sell Kimanis in the spot market, according to a company source.

"Regional sweets are supported. Less avails overall and some participants need to secure short haul barrels," another Singapore-based trader said.

Domestic refining requirements diminish spot supply

Meanwhile, spot export tenders from Vietnam's PV Oil also slimmed amid increasing requirements from domestic refineries, pushing up spot premiums.

"Refinery resumes at a normal [run] rate," said a regional sweet crude trader in reference to Vietnamese domestic refineries, adding that the shorter tender program from Vietnam was due to barrels being absorbed by these refineries.

Earlier in November, PV Oil was heard to have awarded a tender offering a 300,000-barrel cargo of January-loading Chim Sao crude to Taiyo Oil at a premium of around mid-$4s/b to Platts Dated Brent crude assessments, FOB.

In comparison, PV Oil was last heard to have sold a similar-sized cargo of December-loading Chim Sao crude to PV Oil Singapore at a premium of mid- to high-$3s/b to Platts Dated Brent crude assessments, FOB.

Tender activity for Vietnamese grades next month should be thin as well, as domestic refineries are expected to maintain run rates, the source said.

The strength in middle-distillate rich regional crudes defied the easing of gasoil and jet fuel cracks, with some sources claiming that the cracks remain supportive even at their relatively lower levels.

The M2 Gasoil swaps cracks versus Dubai crude swaps were last pegged on Nov. 23 Asian close at $11.85/b, the lowest level during the month, falling steadily from the highest level seen on Nov. 9 at $15.19/b.

Following a similar trajectory, the M2 Jet Fuel swaps cracks verses Dubai swaps were last assessed on Nov. 23 at $10.32/b, also the lowest level in the month, falling off from the peak of $13.89/b on Nov. 9.