Asian crude
premiums will be mixed in the coming days as higher official selling prices
from Middle Eastern producers offset stronger refining margins for oil
products.
Singapore's complex refining
margin to Dubai
crude rose 85 cents to $7.34 a barrel in the week to Dec. 30, according to Dow
Jones Newswires calculations. The increase was led by improving demand for
middle distillates and gasoline from countries such as Vietnam and Indonesia.
Support for crude may also come from a closed arbitrage window for sweet grades
from the Atlantic basin, which are becoming relatively more expensive compared
with Middle Eastern grades.
The prompt Brent-Dubai EFS, or Exchange of Futures for Swaps, widened 29 cents
to an average of $3.46 a barrel in the week to Dec. 30, leaving it too wide for
any West-to-East arbitrage.
However, premiums for heavy, sour Middle East
crude continue to be weighed down by weaker demand for Asian fuel oil. Singapore's
fuel oil refining margin narrowed 14 cents to minus $2.36 over the past week,
despite rising margins for all other oil products.
Traders in the coming days will focus on OSP announcements from Middle Eastern
producers such as Abu Dhabi National Oil Co. and Saudi Arabian Oil Co., which are expected to rise. Producers are expected to
increase prices for Asian customers despite strong competition from Russian
ESPO supplies that have increasingly become popular with regional refiners.
Adnoc this week said term supplies for its flagship Murban crude will be 10%
below contract volumes--unchanged from January. It also maintained Lower Zakum
supplies at 10% below contracted volumes, but reduced volumes of the Umm Shaif
and Upper Zakum grades, which are heavier,
because of weaker fuel oil demand.
Crude premiums for March-loading cargoes may also narrow on weaker seasonal
demand ahead of the Lunar New Year holiday in February, several traders said. China's
industrial production typically falls during the period, they said.