Spot trading activity for September-loading crude barrels is expected pick up pace this week while supply-side uncertainty remains as OPEC+ has been unable to reach consensus on production quotas from August onward.
ICE September Brent crude futures were pegged at $75.46/b at 0200 GMT July 12, 93 cents/b higher from the 0830 GMT Asian close July 9.Middle East** Eyes will be on the issuance of Qatar Petroleum's Al-Shaheen tender this week, with cash premiums in the tender expected to be supported amid stronger demand cues emerging from Asia.
** Last week, India commenced its crude purchasing for September. Indian Oil Corp. bought via tender 2 million barrels of Upper Zakum crude at a premium of around $2.40/b to Platts Dubai crude assessments, FOB, and 1 million barrels of Das Blend at a premium of around $3.75/b to Platts Dubai crude assessments on a delivered basis. IOC also bought 2 million barrels of Nigerian crude.
** The Dubai cash/futures (M1/M3) averaged $2.58/b in the week ended July 9 against $2.13/b in the week ended July 2.
** Intermonth spreads were wider during midmorning trade July 12, with September/October pegged at 85 cents/b, unchanged from the Asia close July 9.
** The September Brent/Dubai Exchange of Futures for Swaps spread was pegged at $4.07/b at midmorning July 12, narrowing 15 cents/b from the Asia close July 9.
Asia-Pacific regional crude** In condensates, market participants await QPSPP's tender results for September-loading DFC and LSC cargoes, with sentiment remaining supported amid a wide Brent/Dubai EFS.
** Traders will monitor activity on September-loading cargoes of Australia's North West Shelf condensate, after the loading program emerged last week reflecting a total of two cargoes, one each held by Shell and Mimi -- a joint venture between Mitsui and Mitsubishi.
** In Southeast Asia, the outcome of PV Oil's tender for September-loading Chim Sao crude remains in focus. The sentiment remains upbeat amid marginally improving product cracks and largely stable refinery run rates, despite resurgences in COVID-19 cases in the region. The loading program for Malaysian crude grades and further tenders from PV Oil are also keenly awaited.
** For heavy sweet crudes, market participants are keeping a lookout for trades of August-loading barrels of Van Gogh crude, which are heard yet to be sold.
Delivered crude** The arbitrage of WTI Midland into north Asia and Southeast Asia remains largely unviable amid a wide Brent/Dubai structure and a steep backwardation.
** Demand from Chinese independent refineries for October-arrival cargoes of crude may also be limited amid tight crude import quotas.
Crude futures** This week, analysts expect volatility in the oil markets as a deadlock between Saudi Arabia and the UAE has led to heightened uncertainty about the OPEC+ coalition's production plans from August onward.
** Unconfirmed media reports stating that the UAE is considering increasing production outside of the OPEC+ agreement have raised fears of a breakdown in OPEC+ cooperation, which could result in reduced compliance to quotas and an increase in oil supply.
** The possibility of increased OPEC+ supply pushed the September contract for ICE Brent futures 0.81% lower on the week to settle at $75.55/b on July 9, whereas the August contract for NYMEX light sweet crude fell 0.81% at $74.56/b. Both contracts were seen paring back their losses on account of bullish data from the American Petroleum Institute and the US Energy Information Administration, which showed US inventories maintaining their downtrend.
** Outside of the OPEC+ stalemate, analysts remained bullish on the demand outlook for oil despite a rise in COVID-19 infections in major economies such as the US and UK, as higher vaccination rates could weaken the link between infection and severe disease.
