Asia crude - Key market indicators this week

Singapore — The crude oil market in Asia started the week of Dec. 14 lower, as negotiations over a US stimulus package remained stalled, while the prospect of more Iranian oil amid near-term uptick in COVID-19 cases, offset the optimism brought by the granting of an emergency authorization by the US Food and Drug Administration for the Pfizer-BioNTech COVID-19 vaccine.

February ICE Brent crude futures was pegged at $50.10/b at 0300 GMT Dec. 14, down 39 cents/b from the Asian close on Dec. 11.

MIDDLE EAST CRUDE

**Trade for February-loading barrels is expected to peak this weak post issuance of official selling prices by all major Middle East oil producers. Producers have mostly raised their respective OSPs for January-loading barrels, largely within or slightly higher than expectations.

**Iraq's SOMO issued OSPs for its newly-launched Basrah Medium grade, with the January OSP for Asia set at a discount of 65 cents/b to the monthly average of Oman/Dubai.

**Qatar Petroleum is expected to issue its monthly Al-Shaheen crude tender this week, which will set the tone for trade in the spot market for February-loading barrels.

**The outcome of India's MRPL crude tender seeking 1 million barrels high sulfur crude that closed Dec. 9 is awaited. Apart from MRPL, IOC has recently purchased 3 million barrels of Upper Zakum crude and 1 million barrels of Das Blend crude for February-March delivery.

**The Dubai cash-futures, or the M1-M3, spread widened to an average premium of 73 cents/b in the week ended Dec. 11, from a premium of 48 cents/b the previous week.

**Intermonth spreads narrowed slightly during mid-morning trade Dec. 14 with the January-February pegged at 31 cents/b compared with 33 cents/b at the Asia close on Dec. 11.

**February Brent-Dubai Exchange of Futures for Swaps was pegged at $1.04/b mid-morning Dec. 14, lower than the $1.06/b at the Asia close on Dec. 11.

ASIA PACIFIC CRUDE

**In the condensates market, the February-loading program for Australia's North West Shelf condensate emerged with three cargoes set to load during the shorter month.

**Sources noted that the first cargo in the February North West Shelf condensate program held with Shell has been sold to Indonesia's TPPI.

**Light product margins rose through the week, with gasoil and naphtha crack spreads providing support to grades, leading to the expectation of higher numbers being achieved by sellers for February-loading cargoes.

**The February-loading program for Kutubu emerged revealing a single cargo of the grade will be loading during the month over February 19-23.

**Two Vietnamese crude tenders for February-loading cargoes were issued by state-owned PV Oil with single cargoes of Chim Sao and Thang Long offered. Validities for both will expire this week.

**In the Far East Russian market, Indian ONGC's first sell tender for Sokol crude in December, for loading Feb. 12-18 was not awarded.

**In Malaysia traders were expecting a pick up in activity next week, with the February Kimanis program revealing eight stems of the grade loading through the month.

DELIVERED CRUDE

**In the delivered crude market, spot trading activity remained muted, while sellers were heard to have started to look for higher levels, as sell-side sentiment was buoyed by higher light product crack spreads.

**Discussions for March delivery of Brazilian Tupi cargoes started to see higher levels with sellers hoping to see the grade trade above a $3/b premium to ICE May Brent Futures, DES basis, however trades at this level were yet to be reported.

CRUDE FUTURES

**In the week ahead, much of the movement in oil futures will be underpinned by news of COVID-19 vaccines. The oil market may get a boost after the US Food and Drug Administration gave Pfizer-BioNTech vaccine an Emergency Use Authorization late Dec. 11, and as vaccines from Pfizer's Kalamazoo facility have begun shipping out. An FDA advisory committee is also expected to meet Dec. 17 to discuss the Emergency Use Authorization for the Moderna vaccine.

**Uncertainty over the US stimulus package, which is seen by the market as crucial to US economic recovery and oil demand, continue to persist in the market amid stalled negotiations, but progress on this front may send bullish signals to the oil market.

**Vaccine cheer resulting from the start of vaccine distribution in the UK had negated the impact of a host of bearish developments in the week ended Dec. 11, including the Energy Information Administration's report of a 15.19 million-barrel build in US crude inventories in the week ended Dec. 4. The EIA report had also indicated weak downstream demand as it had shown a 4.22 million-barrel and 5.22 million-barrel increase in US gasoline and distillate inventories.

**February contract for Brent and the January contract for NYMEX light sweet crude had risen by 1.46% and 0.67%, respectively, in the week ended Dec. 11, with the front-month Brent contract breaching the $50/b level briefly for the first time since March.