Asia crude - Key market indicators this week

Singapore — Asia's crude oil market started the week of Dec. 28 lower as crude futures ticked down after countries around the world found cases of the purportedly more transmissible B.1.1.7 strain, and as COVID-19 infection numbers remained on an uptrend.

The ICE Brent February crude contract fell 13 cents/b (0.25%) from the Dec. 24 settle to $50.16/b at 11:12 am Singapore time (0312 GMT) Dec. 28.

MIDDLE EAST CRUDE

** With the commencement of the year-end holidays, spot differentials for February-loading cargoes are likely to remain under pressure as buying activity slows.

** As the new COVID-19 strain across many countries increases risk of renewed lockdowns, concerns on oil demand are back in focus. This further increases likelihood of cheaper arbitrage barrels from the West being preferred over Middle East crude by Asian buyers.

** China's Rongsheng was heard to have bought 1 million barrels each of Upper Zakum and Oman crude for February-loading. The Oman cargo was reportedly bought at a premium of around 60 cents/b and Upper Zakum at around 50 cents/b to Platts front-month Dubai crude assessments, respectively.

** Taiwan' Formosa was heard to have bought 1 million barrels of February-loading Oman crude through a tender, but award details could not be confirmed.

** India's MRPL issued another buy tender for 1 million barrels of crude for end-January to early February delivery. The tender closed Dec. 21.

** The Dubai cash/futures (M1/M3) averaged 34 cents/b in the week ended Dec. 24, against 80 cents/b in the week ended Dec. 18.

** Intermonth spreads narrowed during mid-morning Dec. 28 with the January-February pegged at 13 cents/b, compared with 16 cents/b at the Asia close on Dec. 24.

** February Brent-Dubai Exchange of Futures for Swaps was pegged at 66 cents/b mid-morning Dec. 28, steady from the 67 cents/b at the Asia close on Dec. 24.

ASIA-PACIFIC REGIONAL CRUDE

** In the condensates market, both regional sour and sweet condensates were heard trading at higher premiums on the back of improved naphtha and gasoline margins.

** February-loading Qatari deodorized field condensate had reportedly traded at around parity to Platts Dubai, FOB, while Australian Northwest Shelf condensate was reportedly valued at a premium of around $1/b to Platts Dated Brent assessments, much higher than deals heard done for early-February loading NWS condensate cargo.

** In the Malaysian crude oil market, an end-February loading Labuan crude cargo is expected to change hands this week, with discussions heard in the high-2s/b to Platts Dated Brent assessments. Elsewhere, Indonesia's Pertamina is expected to offer a cargo of Kidurong crude cargo for Feb. 22-26 loading, with negotiations still ongoing.

** What could weigh on MCO discussions is the availability of competing Banyu Urip cargoes in the spot market, sources said. Valuations for the grade were heard at Dated Brent plus around low-$1s/b to high-$1s/b, FOB.

** In the heavy crude market, February loading Australian Vincent and Pyrenees were heard to have changed hands at higher premiums than January, traders said. A second February-loading cargo of heavy distillate-rich Vincent crude was heard to have traded at a premium of around high-$9s/b to Platts Dated Brent, FOB, while an earlier spot tender for Pyrenees loading over Feb. 5-9 was heard to have been awarded by BHP at similar levels.

DELIVERED CRUDE

** Pertamina will be seeking via spot tender various sweet crude grades for delivery to various ports over February to March. The tender closes Jan 4, 2021.

** Thailand's PTT was reported to have awarded its buy tender for 300,000-1 million barrels of sweet crude barrels for mid-February to mid-March arrival, with traders indicating that the refiner has purchased US WTI Midland crude instead of regional grades. Current valuations for WTI Midland was heard equivalent to May ICE Brent plus around $1-$1.50/b, DES Asia.

** Meanwhile, offers for March-delivery Brazilian Lula or Tupi crude, was heard at around mid-to-high-$2s/b to May ICE Brent Futures, DES Qingdao. Premiums could ease further as market moves into the holiday season and as Chinese independent refiners shift their focus to competing Far East Russian and West African crude markets.

CRUDE FUTURES

** News concerning the coronavirus pandemic will continue to determine the trajectory of oil prices this week, after a highly infectious mutant strain of the coronavirus, called B.1.1.7, raised fears of tougher and longer lockdown restrictions.

** US President Donald Trump's refusal to sign a Congress-approved $900 billion stimulus package had also weighed on the oil complex last week, and uncertainty over fiscal relief continues to persist this week.

** Fears over B.1.1.7 and uncertainty over the US' proposed fiscal package had put downward pressure on oil prices in the week ended Dec. 24, with the February contract for Brent and the February contract for NYMEX light sweet crude falling 1.86% and 2.05% to settle at $51.29/b and $48.23/b, respectively.

** Oil prices, however, had found some support towards the end of last week, after data released by the Energy Information Administration showed a decline in US crude and product inventories, and as reports of a Brexit trade deal boosted sentiment in the market.