Asia crude market likely to remain weak
Asia crude market likely to remain weak
SINGAPORE (Reuters): The Asian crude market was expected to
see further downward price pressure this week, with colder
weather in Japan unlikely to translate into greater demand,
traders said yesterday.
Suppliers were hoping for Chinese demand to emerge in the
short term in the wake of the Lunar New Year holiday, while an
Indian Oil Corp (IOC) tender award of three Dubai cargoes was
expected to offer some support to the Middle East market.
But some deals for Asian crudes was further undermining
sentiment and the demand/supply outlook remained bearish, traders
said.
News of a United Nations proposal to increase Iraqi oil sales
was unlikely to affect traded differentials in Asia, but was
likely to undermine outright prices if Brent falls sharply.
"The Iraq news will affect Brent, but it won't make a
difference to the actual prices of crudes in Asia," said one
trader.
U.N. Secretary-General Kofi Annan proposed on Sunday that Iraq
be allowed to increase oil sales to $5.2 billion from the current
$2 billion.
Currently Iraq is only allowed to sell oil worth $2 billion
under its existing "oil-for-food" deal with the U.N.
March Brent on the Singapore International Monetary Exchange
(SIMEX) was quoted at $15.71/$15.95 per barrel on Monday in
response to the news, down from the London Brent close of $15.96.
On Asian crudes, traders saw a deal for February heavy sweet
Indonesian Minas crude done at a discount of a few cents to the
official Indonesian Crude Price (ICP) as a sign of continued
weakness in the market.
Traders said that this was the first February Minas trade done
at a discount.
Prior to the deal, February Minas traded at premiums of around
10 to 15 cents to the ICP.
Traders said that high stocks in China kept refinery buying at
a minimum ahead of the Lunar New Year, in contrast to previous
years, when Chinese demand normally surged just before the New
Year.
A mild winter was also keeping Japanese buyers at bay, adding
further downward pressure to the market.
This is despite reduced supplies from Indonesia and the
movement of a substantial volume of Asian crude to the U.S.
"The Japan weather is turning colder now. But we still haven't
seen any rise in demand," said one Japanese trader.
Traders said that unsold cargoes of heavy Vietnamese Bach Ho
crude for February was also reflective of the weak overall demand
in Asia.
But the bulls were now hoping for a possible increase in
Chinese demand following the end of Lunar New Year holidays, to
provide some support to the market, traders said.
"Traders are watching Chinese demand," said a Japanese trader.
"China bought very little before the New Year, so maybe they will
buy more after the New Year."
China businesses have effectively been closed since Monday
last week for New Year celebrations.
Traders said the IOC award of three cargoes of Dubai crude in
its March buying tender should offer some support to an otherwise
weak Middle East market.
"I think March Oman will trade around MPM -10 to -15 cents,
compared to -20 cents last week," said a western trader.
The IOC awarded a Dubai cargo to Caltex at 32 cents under
March first half month quotes.
It awarded a cargo each to Total [TOTF.PA] at 48 cents under
March second half month quotes, and to Mobil [MOB.N] at 60 cents
under March second half month quotes.
In addition IOC also bought three very large crude carriers
(VLCC) of Nigerian Qua Iboe crude.