Asia crude - Key market indicators this week

Singapore — The Asian crude market started the week of July 27 lower as the demand outlook was weighed down by rising US-China tensions.

The September ICE Brent crude futures was pegged at $43.19/b at 0200 GMT July 27, down 17 cents/b from the Asian close on July 24.

MIDDLE EAST CRUDE

**The September Dubai futures was pegged at $43/b on the morning of July 27, compared with $42.87/b at the Asian close on July 24, as the Brent/Dubai Exchange of Futures for Swaps narrowed to 19 cents/b from the 49 cents/b assessed at the Asian close on July 24.

**The contango for Dubai futures has widened in recent days although it was relatively steady on the day on July 27. The August/September was pegged at minus 25 cents/b and September/October at minus 21 cents/b on July 27. This compares with minus 25 cents/b for August/September and minus 19 cents/b for September/October at the Asian close on July 24.

**The September trading cycle for Middle East crude cargoes is mostly wrapped up, with market participants evaluating their expectations for the upcoming round of official selling prices.

**The cash/futures structure for benchmark Dubai crude has contracted in recent days as overall demand for sour crude slowed. The Dubai M1/M3 spread was assessed at 23 cents/b on July 24, marking a seven-week low.

**Overall spot trading activity is expected to be quiet this week as most purchasers have fulfilled their buying requirements for the September cycle.

**Suppressed recovery in refinery margins and high inventories are expected to keep the near term outlook bearish, market sources said.

ASIA PACIFIC CRUDE

**Participants expect the regional markets to be quiet in the week beginning July 27, with spot market activities largely concluded for September loading cargoes.

**In the condensate market, traders would be looking out for Australia's North West Shelf sale tenders for September-loading cargoes with traders expecting price differentials for the condensate to trade in discounts as downstream petrochemical and naphtha margins are weak.

**In the heavier sweet crude market, traders are anticipating spot trades for August-loading Nile and Dar Blend cargoes as well as sell tenders for Indonesian Duri crude. Last month, July-loading Nile and Dar Blend traded at parity and a premium of $1-$2/b against Platts Dated Brent assessments, respectively.

DELIVERED ASIA CRUDE

**In the delivered crude market, participants will be looking out for purchase of the US' WTI Midland crude from CPC Taiwan for October delivery. Last month, the refiner bought September delivery cargoes of the crude at a premium of around mid-$2s/b to Dated Brent, DES.

**Demand for Brazilian crude is expected to continue on it bearish trend in the week beginning July 27 as demand from Chinese independent refiners have been muted amid poor domestic margins and port congestions in China.

CRUDE FUTURES

**Prices are expected to remain rangebound behind an evenly matched bullish and bearish forces, after Brent failed to breach the $45/b resistance despite promising COVID-19 vaccine results and the European Union's Eur750 billion emergency stimulus package.

**The prompt intermonth timespread for Brent swaps remained firmly in contango, averaging minus 26 cents/b in the week ending July 24th, wider than the minus 22 cents/b in the prior week.

**The US dollar and crude prices have gone into a strong inverse correlation in recent weeks, and a weakening dollar against most of the major currencies, currently at its lowest since 2018, will continue to provide support for the global crude complex.