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Market Movers Asia, Jul 30-Aug 3: Market watches movement of China-bound US crude cargoes; APW wheat price hits record high

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Watch: Market Movers Asia, Jul 30-Aug 3: Market watches movement of China-bound US crude cargoes; APW wheat price hits record high

The market continues to watch tanker movements to see where US cargoes, originally bound for China, end up. Platts ship tracking software cFlow showed last week that oil tankers laden with US crude that were initially headed to China appear to be diverting to other buyers.

Market participants will also be keeping an eye on the Middle Eastern crude market structure after the second- and third-month Platts cash Dubai spread flipped into contango on ample supply. Kuwait recently introduced its new Extra Light grade to South Korean and Japanese refiners, while ADNOC said early this month that it would start providing full term contractual volumes to Asian customers.

Meanwhile, the price of Australian premium white wheat hit a record high amid worries over the new crop yield. Traders said a forecast of drier-than-average weather for August-October triggered panic buying as consumers scrambled to secure supply, expecting new crop prospects to be lower.

And still in agriculture, S&P Global Platts is launching three soybeans price assessments - SOYBEX CFR China, SOYBEX FOB Santos (Brazil) and SOYBEX FOB Paranagua (Brazil) on July 31.

Andrei Agapi, managing editor - agriculture, talks about this and other updates on Platts Market Movers.

View Full Transcript

This week, the Middle Eastern crude market structure flips to contango and the China to Southeast Asia methanol arbitrage remains strong.

But first, in agriculture, Australian premium white wheat hit a record high of $268.50/mt on July 26 amid worries over the new crop yield. Traders said a forecast of drier-than-average weather for August-October triggered panic buying as consumers scrambled to secure supply, expecting new crop prospects to be lower. Despite the strong bid levels, farmers in Australia have been reluctant to forward sell amid a lack of confidence. The market expects the price uptrend to continue on strong demand, while growers remain in the sidelines waiting for further clarity on new crop conditions.

Still in agriculture, positive news for US farmers is giving Chicago futures a boost. This includes a 12 billion dollar temporary aid package and President Donald Trump's announcement that the EU has agreed to buy more soybeans from the US. But all the bullish news for US farmers is having a negative impact on imported beans to China. CFR basis levels still remain in the low 300 cents/bushel range for September shipment from Brazil, and buying prospects are also poor. With low crush margins, buyers prefer to wait out the market highs.

Watch for more price information on soybeans as Platts launches CFR China and FOB Brazil assessments on July 31.

In oil, market participants will be keeping a close watch on the Middle Eastern crude market structure after the second- and third-month Platts cash Dubai spread flipped into contango on ample Persian Gulf supply.

Kuwait recently introduced its new Extra Light grade to South Korean and Japanese refiners, while ADNOC said early this month that it would start providing full term contractual volumes to Asian customers.

Asian refinery sources said they were hopeful that higher Q3 and Q4 supply and the bearish Dubai market structure will spur a series of cuts in major Middle Eastern official selling prices going forward.

Also in oil, the market continues to watch tanker movements to see where US cargoes, originally bound for China, end up. Platts ship tracking software cFlow showed last week that oil tankers laden with US crude that were initially headed to China appear to be diverting to other buyers. At least one tanker's destination was alternating between South Korea, Japan and India.

So for our social media question this week: Where will China-bound US cargoes end up amid the trade war?

And finally, in the methanol market, the China to Southeast Asia arbitrage will likely remain strong this week, with active discussions heard from traders in both regions. East China, which traditionally imports methanol, is looking to export due to a combination of low domestic China prices and weak MTO demand. A weakening of the Yuan against the dollar also tips the scale in favor of exports.

That's it for this week. Thanks for kicking off your Monday with us and have a great week ahead!