Asian oil markets face weak 2nd quarter

Asian oil markets face weak 2nd quarter

SINGAPORE (Reuters): Asian oil markets, already suffering from ample supply, are unlikely to have much to cheer in the next few months as the region heads into the traditionally weak second quarter, traders said on Tuesday.

Prices for refined products -- naphtha, gasoline, kerosene, gas oil and fuel oil -- held steady at lower levels or softened in March and there appears little to offer any upside potential, they said.

Asian refiners will most probably cut crude runs during the period, reducing the region's requirement for crude imports which also will be capped by a slew of refinery maintenance stoppages.

"Oil prices are likely to retreat by five to 10 percent across the board over this quarter, unless we see more OPEC cuts before June," said Gordon Kwan at HSBC Securities in Hong Kong.

"Between now and then, it is difficult to see prices going up in light of slowing demand in Asia because of the economic problems in the United States."

Across the region, Asian currencies have also showed a weakening tendency against the U.S. dollar, another factor which could dampen demand for imports from the region.

Asian crude buyers appear to have easily absorbed the latest round of output cuts by the Organization of the Petroleum Exporting Countries.

OPEC's one million barrel per day (bpd) cut came into effect on April 1, bringing the cartel's total reduction on paper to 2.5 million bpd so far this year.

Leading OPEC sellers Saudi Arabia and Kuwait informed Asian term customers liftings would be 13 to 15 percent lower versus standard contract volumes from April.

There was little short-cover buying from refiners following the cuts.

"This matches our lower demand due to maintenance shutdown plans for our refinery," one Asian refiner said.

About two million barrels per day of crude distillation capacity in major consumers such as Japan, South Korea and China are due to go into turnaround in the second quarter with stoppages ranging between two weeks and one month.

In Singapore, Asia's major swing refining center, Shell announced earlier this week a 22 percent cut to crude throughput at the Bukom refinery taking operating rates down to less than 50 percent of the 430,000 bpd nameplate capacity.

Spot crude demand in Asia already was on the wane with crudes from Oman, Qatar and Abu Dhabi trading mostly at small discounts to official selling prices for May loading.

Traders said direction appeared to be downhill for June with expectations of a flood of arbitrage supplies from West Africa.

Over one million bpd of African crudes have been committed to lift in April and will hit Asian shores by late May onwards.

In London, Brent crude oil futures traded 19 cents up by late morning to $24.30 a barrel.

U.S. oil prices hovered just above 11-month lows on Tuesday. Benchmark U.S. light crude stood six cents up at $25.73 a barrel after tumbling 70 cents in New York on Monday, when it was dragged down by hefty losses on oil products markets.