Asia crude - Key market indicators this week

Singapore — The crude oil market in Asia started off the week of Nov. 23 firmer, primarily driven by optimism over the pace of development of COVID-19 vaccines and a possible extension of OPEC+ output cuts into 2021.

January ICE Brent crude futures were pegged at $45.04/b at 0300 GMT Nov. 23, up 77 cents/b from the Asian close Nov. 20.

MIDDLE EAST CRUDE

** Trade activity for January loading barrels is expected to ease this week as most Asian refiners have fulfilled the bulk of their purchasing requirement for the month.

** Purchases by Japanese refiners are expected to slow down while some emergence of demand for January loading cargoes could continue for India and China.

** With the conclusion of most tenders last week, focus this week will turn towards assessing the upcoming January official selling prices from Middle East producers.

** The Dubai cash-futures (M1-M3) spread rose to a premium of 35 cents/b in the week ended Nov. 20 from parity the previous week, bringing the average in November so far to 12 cents/b, much higher compared to a minus 67 cents/b average in October.

** Intermonth spreads were higher at 11 am Singapore time (0300 GMT) Nov. 23 with December-January pegged at 19 cents/b, compared with 14 cents/b at the Asia close Nov. 20.

** January Brent-Dubai Exchange of Futures for Swaps was pegged at 55 cents/b mid-morning, widening from the 41 cents/b at the Asia close Nov. 20.

ASIA-PACIFIC CRUDE

** Weakening naphtha margins are expected to cap further recovery in sentiment in the condensates and light crude markets, according to market sources.

** Sentiment in the medium crude markets, including the Malaysian and Vietnamese grades, strengthened in recent weeks following a stronger Middle Eastern Dubai and Oman complex, as well as expectations of an uptick in Asian end-user demand.

** The market will also be on the lookout for more activity on January loading Australian heavy sweet crudes, including Vincent and Pyrenees.

** The outcome of the latest Indian OVL's Sokol tender for a cargo loading end-January to early February is also expected to emerge in the week.

DELIVERED CRUDE

** Traders are expecting strong sentiment to persist in the February delivered Brazilian Lula (Tupi) crude market, amid improving domestic Chinese demand as well as supported ESPO prices in recent tenders.

** More trade indications may also emerge for the February delivered US WTI Midland crude market.

CRUDE FUTURES

** The rally in crude prices seen in the week ended Nov. 20 is expected to taper off this week, as the market has largely priced-in the reports of progress on the vaccine front. The uninhibited rise in COVID-19 infections around the world is also expected to exert some downward pressure on the market.

** The January contract for Brent and WTI settled 5.10% and 5% higher on the week, respectively, in the week ended Nov. 20, driven by reports of a Moderna vaccine with a 95% efficacy rate, and speculation that the incoming Biden administration is reluctant to impose draconian nationwide lockdowns. The signing of the Regional Comprehensive Economic Partnership also provided a boost to the oil markets as the trade agreement was expected to stimulate economic activity, and concomitantly energy demand.

** With the recent Joint Ministerial Monitoring Committee meeting offering little insight into the OPEC+ alliance's production plan going into 2021, the market is now awaiting the OPEC and non-OPEC ministerial meeting on Dec. 1. Most market analysts are expecting a three-to-six month extension of the current 7.7 million b/d production cut, but some analysts believe that the production cut could even be deepened.