Asia crude - Key market indicators this week

Singapore — The crude oil market in Asia started off the Sept. 28 trading week on a softer note, as concerns over the rising number of pandemic cases globally weighed on the outlook for demand recovery.

November ICE Brent crude futures was pegged at $41.82/b at 0200 GMT Sept. 28, down 28 cents/b from the Asian close Sept. 25.

Middle East crude

**Spot trading for the November cycle is expected to be muted as activity quietens, with the sour crude market entering the new December trading cycle from Oct. 1.

**Market participants are expecting Middle Eastern producers to raise the upcoming Nov OSPs amid slight recovery in the market structure for Dubai.

**Dubai cash/futures (M1/M3) spread averaged at minus 53 cents/b in September so far, edging up from an average of minus 63 cents/b seen in August.

**Prompt intermonth spreads were in a rangebound contango mid-morning on Sept. 28, with the October/November pegged at minus 13 cents/b, edging up slightly compared with minus 17 cents/b at the Asia close on Sept. 25.

**November Brent/Dubai Exchange of Futures for Swaps was pegged at minus 23 cents/b in mid-morning, narrowing compared with minus 30 cents/b at the Asia close on Sept. 25.

Asia-Pacific crude

**In the condensate market, market participants would be looking out for spot deals for some of the unsold cargoes for November-loading, including Wheatstone and Pluto in the week of Sept.28, traders said. Price differentials for condensates have been supported this month amid higher naphtha margins although downside risks remain with poor demand, traders said.

**Tender results for December delivery Sakhalin Blend crude are also expected in the week beginning Sept .28, traders said with expectations for price differentials supported by underlying strength seen in condensate price differentials , traders said.

**In the regional market, spot offers for November loading Malaysia's Kimanis. crude is expected in the week beginning Sept. 28, traders said. Despite record low product cracks for gasoil, price differentials for November-loading middle distillate rich grades have remained supported by higher prices of competing arbitrage barrels, traders said. Expectations for November-loading Kimanis crude is around small discounts to Platts Dated Brent on a FOB basis, traders.

**Spot trade activities for October-loading Nile and Dar Blend are also expected in the week of Sept. 28, traders said.

**Meanwhile, market participants would also be looking out for official selling prices of October-loading crudes from Indonesia and Malaysia in the week, traders said.

Delivered Asia crude

**Market participants would be looking to see if CPC Taiwan took any December delivery US WTI Midland crude in their tender in the week of Sept. 28, traders said. No cargoes of US WTI Midland were bought for November delivery, traders said amid lower domestic demand.

**Spot trade activity for December delivery Brazilian Lula crude has been thin with most independent refiners having already exhausted their import quotas for 2020, traders said. Some discussions for January delivery Lula crude have already begun with offers heard at around 50 cents/b to March 2021 ICE Brent Futures, DES Qingdao, traders added.

Crude futures

**Crude futures fell in the week ended Sept. 25, after the front month contracts for Brent and WTI recorded a drop of 4% and 2%, respectively to settle at $41.92/b and $40.25/b on Sept. 25.

**The prospects of fresh lockdown restrictions in Europe amid a resurgence of the coronavirus pandemic, and a slowdown in US economic recovery contributed to a bleak demand outlook for oil.

**On the supply side, a toughened stance from Saudi Arabia and Russia on the OPEC+ compliance laggards provided some reassurance, but the market remained wary after the Libyan National Army lifted its blockade on oil exports and news that that there could be an increase in Iraqi supply.

**The contango for the prompt intermonth spread for Brent swaps at the Asian close narrowed 7 cents/b to a weekly average of minus 43 cents/b for the week ended Sept. 25.

**Front month HSFO Fuel oil swap cracks versus Brent swap averaged lower during the week ended Sept. 25 week at minus $4.39/b for 380cst and minus $3.50/b for 180cst, compared to minus $3.79/b and $3.10/b, respectively in the week ended Sept. 18.