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Market Movers Asia, Dec 7-11: Refiners set to benefit from new Iraqi crude

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Watch: Market Movers Asia, Dec 7-11: Refiners set to benefit from new Iraqi crude

The highlights in Asia this week on S&P Global Platts Market Movers Asia: refiners will be paying pay close attention to Iraq's monthly official selling price announcement this week as the State Oil Marketing Organization is set to launch a new Basra Medium crude for sale in 2021, while clean tankers expect freight rates to rise amid strong demand.

Also on this week's episode:

* Coal prices eye support from China

* Asia buyers expect reduced US and South American corn stocks

View Full Transcript

This week: The launch of a new Middle Eastern crude grade set to benefit Asian refiners, clean tanker freight rates to test 6-month highs, and coal prices eye support from China.

But first, in oil, Asian refiners will be paying pay close attention to Iraq's monthly official selling price announcement this week as the State Oil Marketing Organization is set to launch a new Basrah Medium crude for sale in 2021.

For Asian customers, SOMO last set Basrah Light for loading in December at a premium of 45 cents per barrel to the Oman/Dubai average and Basrah Heavy at a discount of 95 cents per barrel to the same average.

For cargoes to load in January, SOMO is expected to price the new Basrah Medium crude at around 40-50 cents per barrel below Basrah Light, and it should be cheaper than Abu Dhabi's Upper Zakum and Saudi Arabia's Arab Light and Medium, according to feedstock managers at Asian refineries surveyed by S&P Global Platts.

Asian refiners are poised to benefit from the sale of the new Iraqi crude in 2021 as the medium-heavy sour grade would enable them to align their Middle Eastern feedstock procurement options with their refinery models to help with costs.

Given the current ample supply and weak refining margins, competitive pricing would be a driving factor when refiners source crude feedstocks, and a new crude typically needs to be priced at a discount to attract buyers, according to Platts Analytics.

This brings us to our social media question this week: Do you think Asian refiners will benefit from the launch of the Basrah Medium grade? Share your thoughts with the hashtag PlattsMM

In the clean tankers market, rates on some key East Asia routes are expected to hit more than 6-month highs this week on strong demand from Australia, where the Kwinana refinery is being shut down.

Australia is increasingly purchasing from China, Japan and the Middle East, in addition to its traditional sources such as Singapore and South Korea, as its import demand shoots up.

This comes at a time when China is producing an estimated one million barrels per day of surplus refined products, and its exports are providing much-needed support to clean tanker freight rates.

Medium Range rates are expected to rise for voyages from North and Southeast Asia this week as China looks for destinations for its surplus. Rates on the key South Korea-Singapore route are at their highest since May and are expected to rise further in the next few days.

In related news, surging container freight costs are spurring significant price gains in aluminum and aluminum alloy markets in December. Container freight costs typically do not feature strongly in price discussions for either product, but the recent bullishness in container freight demand, and the challenges in finding both empty containers and space on ships, has pushed it to the fore. The Platts Container Index was assessed at almost 2,757 dollars per forty foot equivalent unit on December. 2, the highest since the index was launched in mid-2017.

Meanwhile, China's domestic coal prices are also expected to rise this week on supply shortages heading into winter.

High-ash Australian coal prices are also expected to be supported by demand from India amid a high price environment for high-CV seaborne coal.

Indonesian mid-high cv coal prices are expected to remain resilient after a flurry of procurements from China and pockets of supply tightness in Kalimantan as heavy rain slows down production.

India's interest in imported coal is set to dip as seaborne FOB prices rise, while lifting from Indian port stockpiles is expected to continue.

And finally, in agriculture, Asian market participants have told a Platts survey they are expecting a reduction in US and South American ending stocks for corn when the USDA releases its World Agricultural Supply and Demand estimates report on December 10, due to poor weather caused by La Nina.

Thanks for kicking off your Monday with us. Have a great week ahead!