Asian buyers swoop in for bargain picks on Middle East crude

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Crude buyers in Asia emerged from the sidelines to pick up Middle East sour crude cargoes at bargain prices in mid-morning trade Friday after a week of sizable losses, and as signs of a turnaround for falling crude prices started to appear.

Various buyers were starting to make inquiries for Middle East crude barrels for the May trading cycle, market participants in Asia said. Buyers that spoke to S&P Global Platts Friday morning said they were “keeping their options open.”

“The market is in a mess right now, and there is plenty of supply, lots of [unsold] cargoes floating around,” a refiner based in Southeast Asia said.

Demand destruction from the coronavirus has seen prices for crude barrels sold from the Middle East to Asia undergo three layers of corrections this month. The market saw producers slash official selling prices for crude purchased via term contracts in early March, followed by plunging levels for the benchmarks underlying these prices, as well as multi-year low price differentials for crude grades offered in the spot market by various sellers.

The severe price correction has narrowed quality spreads between light and heavy sour crude grades as well, resulting in premium grades trading in the same ballpark as lower quality medium to heavy sour crudes.

“We ran our numbers and it was very hard to narrow down any one grade [to buy],” the refiner said. “If the price is right, we will buy that grade.”

Crude buyers in Asia have held back from making big purchases until now, waiting for the market to bottom out, which may be just around the corner, other market participants said.

PRICES TURN AROUND

Crude oil prices for global benchmarks turned around overnight after spending most of the week in the red, with comments by US President Donald Trump and a 30 million-barrel crude purchase by the US Energy Department offering a glimmer of hope to oil markets.

May ICE Brent futures settled up $3.59/b Thursday at $28.47/b. By 11 am in Singapore (0300 GMT) Friday, the contract was up 8% at $28.99/b.

May Dubai futures traced the climb, pegged up 7% at $32.42/b at 11 am in Singapore from Thursday’s assessment at $30.41/b.

The May Brent/Dubai EFS, which plunged to a record low of minus $3.54/b Thursday, narrowed slightly to minus $3.43/b Friday morning in Singapore. This is the spreads’ first pro-Brent move since March 9, when it widened from a premium of 16 cents/b to $1.17/b.

The spread was assessed at minus $3.54/b Thursday at 08 30 GMT.

The Brent/Dubai EFS traces the relative strength of the benchmarks against each other. Typically, Brent trades at a premium to Dubai due to quality differences, represented by a premium EFS spread.

However, sentiment in Dubai-linked Middle East crude markets remains open to further downside, depending on how much demand surfaces for the May cycle, market participants said Friday.

Intermonth Dubai crude futures spreads sank lower Friday morning, despite the uptick in flat prices.

The April/May Dubai spread was pegged at minus $1.70/b at 11 am in Singapore (0300 GMT), sinking from minus $1.59/b assessed Thursday at the 4:30 pm close.

Similarly, the May/June spread moved lower, being pegged at minus $1.62/b Friday, compared with minus $1.56/b assessed Thursday.
Source: Platts

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