Feb Malaysian, Australian sweet crude cargo settlement prices likely to surpass $100/b

Crude oil futures have yet to break above the landmark $100/b price level, but Asian refiners and trading companies actively involved in the Southeast Asian and Australian spot crude trades will likely face three digit settlement prices for February cargoes as tight supply and upbeat cracks boost regional sweet crude premiums.

A slew of light sweet Malaysian crude cargoes for loading in February changed hands at premiums of $6/b or more against Dated Brent, while the international sweet crude physical benchmark averaged $96.7/b to date this month, low sulfur crude and condensate traders based in Singapore said, based on S&P Global Platts data.

ConocoPhillips sold 600,000 barrels of Kimanis crude for loading in Feb. 24-28 to an unidentified Asian end user at Dated Brent plus around $6.10/b on a FOB basis, while Malaysia's state-run oil and gas firm Petronas sold 300,000 barrels of Labuan crude for loading in Feb. 27-28 at a premium of around $6/b on a FOB basis, Platts reported earlier.

This could mean final settlement outright prices of the physical Malaysian crude cargoes for February would surpass $100/b if Dated Brent could end the month at an average of minimum $94/b, according to the trading sources familiar with daily Southeast Asian sweet crude spot trades.

Meanwhile, Australia's Vincent crude looks certain to fetch more than $100/b this month as Woodside Energy managed to sell a 550,000-barrel cargo of the heavy sweet crude for loading this month to an oil major at a premium of around $13.05/b to Dated Brent, according to Asian traders with close knowledge of the Oceania spot market deals.

Taking the latest spot premium of $13.05/b and the equivalent Platts Dated Brent value of $100.795/b assessed Feb. 16, this puts the indicative outright value of Vincent at around $113.845/b -- essentially making the Australian oil possibly the most expensive grade in the world, Platts data showed.

Malaysian, Australian premiums

Sentiment for light sweet Malaysian crude oil remains upbeat as healthy diesel and gasoline refining margins, as well as improving people mobility across Asia bode well for middle distillate-rich grades, market participants said.

Heading towards the end of winter, construction sectors in Northeast Asia are stocking up on diesel, contributing to healthy demand and refining margins for the middle distillate fuel, oil product marketers at Japanese and South Korean refiners said.

Meanwhile, driving activity, a proxy for gasoline demand, in Malaysia, Indonesia and Australia has rebounded to 1%, 5% and 31% above baseline levels, respectively, latest Apple mobility data showed, as pandemic movement restrictions ease.

The Asian gasoline swap crack spread reached a six-year high this week. The front-month March FOB Singapore 92 RON gasoline crack against Dubai swaps was assessed at $17.47/b Feb. 14, marking the highest crack spread since $17.78/b on Jan. 27, 2016.

In addition, light sweet crude suppliers in Southeast Asia are confidently making higher offers amid a dearth of African arbitrage barrels flowing into Asia with Nigeria and Angola struggling to meet their respective OPEC production quotas, according to Singapore-based crude and condensate traders with close knowledge of daily Malaysian spot trades.

In Oceania, Australian heavy sweet crude grades have been commanding double digit spot premiums for several trading cycles, supported by robust low sulfur fuel oil, or LSFO, blending requirement from the marine fuel sector in times when many Asian economies are registering robust manufactured goods shipments and exports.

Woodside highlighted in its latest annual report released Feb. 17 that the upstream player achieved record premiums for three crude oil grades including Vincent crude produced from the Ngujima-Yin FPSO, which targeted LSFO blenders as opposed to traditional refineries.

Australian heavy sweet grades including Vincent, Pyrenees and Van Gogh are widely seen as ideal for blending into low sulfur marine fuels due to the grades' rich fuel oil yield, very low sulfur content and unique specifications such as low pour point and high flash point, industry and Asian refinery sources have told Platts previously.

"Woodside has built its liquids marketing capability to optimize value from its oil portfolio. The marketing of crude, condensate and LPG is based on short-term sales, and may be supplemented by term arrangements," the company said in the annual report.