Asia-Pacific medium sweet crude premiums may face pressure from supply increase, weakening cracks

Cash differentials for May-loading barrels of Asia-Pacific regional medium sweet crude could see some pressure on the back of an increase in supply compounded by weakening middle distillate cracks.

The May-loading trade cycle saw eight 600,000-barrel cargoes scheduled for May loading, up from five April-loading cargoes in the previous month, trade sources said.

Petco is set to hold four cargoes for loading over May 1-5, May 12-16, May 21-25 and May 26-30.

ConocoPhillips is set to hold two cargoes loading over May 8-12 and May 31-June 4, respectively, while Brunei Energy and Shell are each set to hold one cargo for loading over May 3-7 and May 17-21, respectively.

Market participants expect the crude grade to be offered into the spot market, though the quantity remains to be seen, as compared to the previous trading cycle when all five April-loading cargoes went back into system.

Petco was also seen offering 300,000 barrels of Bunga Kekwa crude for May 25-30 loading, via a tender that closes March 18, with next-day validity.

"Regional grades have to be low otherwise refiners will just buy arbs," a trader said, emphasizing "regionals can get super distressed [if] demand is lost."

Additionally, Labuan oil field was heard to be undergoing maintenance in May. However, trade sources emphasized the impact would be minimal, with a trader noting that its likely a reduction of one cargo.

In the previous trading cycle, Petco had sold a cargo of the grade loading over April 29-May 1 to Australia's Ampol at a premium of around $7.80s/b to Platts Dated Brent, FOB, while Trafigura had sold its April-loading cargo on an OSP basis, Platts reported previously. The third spot cargo was heard to have sold to an Indian buyer at OSP flat.

Meanwhile, the market is awaiting further pricing cues from the forthcoming results of PetroVietnam Oil's tenders, where the company offered 300,000 barrels each of Chim Sao, Ruby and SV-DN crude for loading over May 14-18, May 3-10 and May 23-29, respectively. The tenders closed March 12, with validity until March 17; March 19, with validity until March 26; and March 18, with next-day validity.

PV Oil had also offered 250,000 barrels of Thang Long crude loading over May 6-11, via a tender that closes March 20, with validity until March 27. The company had also sold 400,000 barrels of Rang Dong crude for May-loading to BSR at a premium in the mid- to high $3s/b to Platts Dated Brent crude assessments, FOB.

The Platts-assessed second-month gasoil and jet fuel swap crack against Dubai crude swaps averaged $14.74/b and $13.81/b, respectively, as of the March 17 Asian close, compared with February averages of $16.23/b and $15.02/b.

The Asian ultra-low sulfur gasoil complex continued to weaken March 14, with market participants citing a poor macroeconomic backdrop and low demand.

Brokers pegged the front-month April-May Singapore gasoil swaps time spread -- an indicator of the near-term market outlook -- at 33 cents/b in midmorning trade March 14, narrowing from the Platts assessment at plus 42 cents/b at the 0830 GMT March 13 Asian close, which had dropped 9 cents/b day over day.

The benchmark cash differential for 10 ppm FOB Singapore gasoil cargoes was down 29 cents from March 12 to plus 24 cents/b over the Mean of Platts Singapore gasoil assessment March 13.

"There are many factors at play -- the supply-demand imbalance, OPEC+ planning production increases and potential trade tensions from US tariffs," a Singapore-based trader said.

"More cargoes are expected to flow into the region from India," another Singapore-based gasoil trader said.

South Korea's GS Caltex had sold two 300,000-barrel cargoes of 10 ppm sulfur gasoil to an unknown buyer at a discount of around 20 cents/b to the April average of MOPS 10 ppm sulfur gasoil assessments, FOB Yeosu, according to market participants.

Asian gasoil to weaken on tepid demand

A supply-demand imbalance amid a poor macroeconomic backdrop have weighed on the Asian ultra-low sulfur gasoil complex, according to market sources.

The benchmark FOB Singapore 10 ppm sulfur gasoil derivative crack spread against the front month Dubai swaps averaged $14.54/b over as of the March 17 Asia close, narrowing from an average of $16.10/b in February, Platts data showed.

"In the paper market, people are selling off to minimize risks; while the economy is really, really bad in the physical market," an Asia-based trader said.

Higher supply outflows than expected from South Korea as well as India had worsened the complex, with demand remaining slow, industry sources said.

Additionally, a narrower EFS spread may see fewer cargoes pointed to the west with the Platts-assessed front-month gasoil exchange of futures for swaps spread -- a measure of the gap between Singapore's 10 ppm sulfur gasoil swaps and the corresponding ICE low sulfur gasoil futures contract -- averaging minus $21.13/mt from March 3-17, narrowing from minus $29.40/mt in February.