A shorter September-loading program for Australia's North West Shelf condensate, consisting of only two cargoes, could alleviate oversupply for the grade as August-loading cargoes of the condensate are still heard yet to be sold, an analysis by S&P Global Platts showed.
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The loading schedule for North West Shelf consists of only two 650,000-barrel cargoes in September, one less than the previous month.
Oil major Shell will hold the first cargo for loading over Sep 12-16, while Mimi, a joint venture between Mitsui and Mitsubishi, will hold the second cargo for Aug. 23-27 loading, sources said.
Supply overhang weighs on sentiment
While a shorter loading program is typically supportive for spot cash differentials for the condensate, sentiment is being bogged down by a supply overhang as North West Shelf cargoes from the previous month remain unsold.
"The market has some surplus of Australian condensates, the cargo is quite abundant," said a source with a North Asian end-user.
According to trade sources, BP and Chevron are yet to have sold their cargoes, which are loading Aug. 5-9 and Aug. 16-20 respectively, even as the trading cycle for August-loading cargoes is coming to an end.
"NWS still quiet.. not much interest from buyers. Petchem margins [are] poor, physical naphtha is weak, some unsold condensate [remains] with August market already done." said a crude oil trader based in Singapore, adding that he saw the value for the grade at discounts to Platts Dated Brent crude assessments, FOB.
Indonesia's PT Trans-Pacific Petrochemical Indotama, or TPPI, a key buyer of the condensate, has also not emerged to soak up the excess August-loading barrels, despite initial optimism that their monthly procurement could keep demand and supply fundamentals balanced.
"TPPI not there...not sure what happened to TPPI," said another Singapore-based condensate trader.
Sour condensates preferred amid wide Brent/Dubai EFS
Meanwhile, demand from other end-users also remains lackluster as a wide Brent/Dubai Exchange of Futures for Swaps continues to favor Dubai-linked sour condensates.
Front-month Brent/Dubai EFS has remained firmly over the $4/b mark in July to date, and was last assessed at $4.16/b at Asian close on July 5, as compared to an average $3.63/b over June, according to data from Platts.
"Korean [end-users] are playing hard to get, [they have] already picked up quite a bit of QP barrels," said the second trader in reference to the trade cycle for August-loading cargoes. "Otherwise, light crude has also been cheap, so they don't have to buy...or rather, [they] can afford to wait and let premiums go down further."
However, recent strength in naphtha cracks and expectations of continued tightness in supply of Qatari condensates could still support premiums for September-loading North West Shelf cargoes.
Second-month naphtha swap crack versus the Dubai crude swap averaged plus $1.17/b over July to date, rising sharply from an average of minus 90 cents/b over June, data from Platts showed.
Furthermore, supply of condensates from Qatar Petroleum for the Sale of Petroleum Products Co. Ltd., or QPSPP, is expected to remain tight as their domestic splitters are now running at full capacity, which may divert some demand towards Australian condensates.
"Their splitters are now running at full rates post maintenance, and hence less condensate exports," said the second trader.