Cash spreads for August loading barrels of sweet crude sentiment barrels are poised to hold a firmer footing in the month on strong cracks in middle distillate products, despite a loading schedule longest seen for Malaysia’s flagship Kimanis crude, traders told S&P Global Commodity Information on June 17.
Seven cargoes of 605,000 barrels of Kimanis are scheduled to be loaded in August, up from five cargoes that were loaded in July last month, according to traders. The usual cargo size for Kimanis crude is 600,000 barrels.
The cargo size difference seen for August cargo barrels was to meet terminal requirements and is unlikely to be a permanent change going forward, according to a crude oil trader.
Platts second-month Singapore jet fuel and diesel swap crack spreads against Dubai crude have averaged $51.93/b and $46.87/b year-to-date in June, up from $36.52 USD/b and 31.57 USD/b, respectively, in May, according to data from S&P Global. He showed.
“The cracks are not closing, the pullback is too strong,” said a crude oil buyer.
Following the launch of Malaysia’s Kimanis cargo program, Brunei Energy has offered its cargo for loading from August 3-7 through a tender that closed on August 16 with validity the next day, according to the sources.
“You never know how high [premiums will be], regional gas-rich [crude] will be strong, the value of which will be difficult to determine, but should be above $1.50/b until [August MCO OSP],” he said. a crude oil trader.
Earlier in the week, traders were heard to price August cargo barrels of Kimanis crude at a $12 s/b premium to Dated Brent, FOB.
Turning to Vietnamese crudes, traders are also awaiting clarity on the results of PetroVietnam Oil’s Chim Sao and Ruby crude tenders, where cash premiums are expected to rise slightly this month.
“The Ruby market remains strong, with Chim Sao about $1/b above Ruby,” a regional crude oil trader said.
While high freight rates and a backlog hovering around record highs could impede arbitrage flows to Asia, traders said some refiners could choose to tap cargoes from West Africa and the Mediterranean if regional crude premiums are too high. faces.
“Compared to last month, regional crude production is leveling off. Cash premiums may increase, but not by much,” a crude trader said.
Demand ready to upgrade
Strong cracks in middle distillates are likely to remain as recovering demand drives up the middle distillates complex, which could keep mid-sweet crude complex elevated in Asia-Pacific.
Platts 10ppm FOB Singapore sulfur gas oil loading and Dubai first month kerosene/jet fuel vs. cash have averaged $60.42/b and $49.47/b in June to date, vs. $45.31/b and $34.83/b in May, respectively, according to S&P. Global data showed, reflecting the growing appeal of producing barrels of middle distillates.
Product cracks for the two spirits have remained at record levels as most countries in the Asia-Pacific region roll back COVID-19 restrictions to adopt a vaccine-backed endemic approach to the virus, leading to a growing demand for transportation.
The recovery in diesel demand has also been supported by the recovery of the industrial and construction sectors in most countries, as they aim to revive their economy after COVID-19.
While gas oil supply is surging in Asia as refiners across Asia max out their gas oil yield to take advantage of lucrative distillate cracks, and closed East-West arbitrage routes keep more barrels of Asian gas oil stuck in the region , sentiment in the market remains strong as it recovers. demand within the region provides sufficient avenues to absorb growing supplies.
“I feel like demand will continue to improve in many countries…[and] so will supplies as long as refineries can run.” said a Singapore-based diesel trader. “Production will fluctuate more to match the product that gets the highest margins, so the premium level will go up and down for diesel, [and] the low and high premium [level] won’t hold for long.”