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Analysis: Malaysian Kimanis crude premiums see bearish outlook in Aug

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Analysis: Malaysian Kimanis crude premiums see bearish outlook in Aug

Singapore — Expectations for price differentials fetched by Malaysia's Kimanis crudecontinue to slide in the August trading cycle, with narrowing margins andplentiful alternatives for buyers, crude traders told S&P Global PlattsTuesday.

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"Kimanis crude [is expected to be] softer, [around] low $3s/b," said aregional end user.

Buyers of light and medium sweet crude grades are seeing a variety ofgrades available from within Asia, as well as from workable arbitrages flowingin from the West, said traders.

"Everything is long regional [crude] and condensate [and] US [crude]keeps coming in," the end user said.

Market sources also pointed to sliding gasoil and jet product margins asa contributing factor to lower premiums for the middle distillate-rich crudegrade.

The August spread between Singapore Gasoil and Dubai crude swap hasaveraged $15.10/b so far this month, from $16.06/b in May, Platts data showed.

Similarly, the August spread between Singapore Jet Fuel and Dubai swapaveraged $15.24/b to date in June, down from $16.23/b last month, the datashowed.

Premiums for Kimanis have fallen in line with narrowing crack spreads.

Kimanis' differential over Dated Brent averaged $3.20/b so far in June,from a whole month average of $3.48/b in May. The crude was assessed Monday ata premium of $3/b. It was last at this level on August 11, 2017, Platts datashowed.

SUPPORT IN SHORTER AUGUST PROGRAM

However, the Malaysian sweet crude grade could still see some supportlent to it because of a shorter-than-usual production program in August, sometraders said.

A total of 5.4 million barrels of Kimanis are scheduled to load inAugust, a decline of 25% from July, trade sources said this week.

The latest loading program for the Malaysian crude shows nine cargoes of600,000 barrels each, from 12 cargoes for the loading program seen by Plattsin July.

The cargoes will be loaded from the Sabah Oil and Gas Terminal.State-owned Petronas is expected to load the most cargoes, with four slipsover August 4-8, 7-11, 15-19 and 19-23.

Oil majors ConocoPhillips and Shell hold two loading slots each, withConoco allocated August 10-14 and August 29-September 2, while Shell hasAugust 1-5 and August 12-16.

Conoco is also offering its August 10-14 cargo via tender in the regionalspot market, crude sources told Platts Tuesday. The tender for 600,000 barrelsof the crude is due to close June 20, they said.

Petrobrunei is expected to load a single cargo of Kimanis over August17-21. Other loaders such as Indonesia's Pertamina or Malaysia's Murphy Oil donot hold any cargoes for August loading, the program showed.

Crude traders said the shorter program was likely due to a productionstoppage during the tail end of the month, but further details around itscauses were still murky.

"The reasonable assumption is that there is some production issue for thelast few days," said a regional crude oil trader.

Petronas could not be reached for comment.

--Eesha Muneeb, eesha.muneeb@spglobal.com

--Edited by Jonathan Fox, jonathan.fox@spglobal.com