Premium recovery expected for Asian crude
Premium recovery expected for Asian crude
SINGAPORE (Reuters): Premiums on Asia's sour crude market are expected to show some recovery as June trade kicks off this week, with demand expected to pick up as refineries return from maintenance stoppages, traders said on Monday.
Traders forecast benchmark medium sour Oman to rise to MOG +10/+15 cents for June barrels, up from May's MOG -5/+3 cents.
"Demand will pick up without supply increasing," one trader with a oil major said.
A heavy schedule of maintenance shutdowns in April and May curbed Asian refiners' appetite for crude in the last two months. Demand is expected to rebound with many plants resuming production.
But key producers in the Organization of the Petroleum Exporting Countries (OPEC) are unlikely to raise supplies to the market given output cuts of 2.5 million barrels per day agreed by the cartel so far this year.
"OPEC will not do anything (to adjust supply) until prices go back to $30 a barrel," another trader said.
Benchmark U.S. NYMEX crude futures were trading on Monday at around $28.30 a barrel.
Most Asian buyers have been notified of a rollover in deep cuts of 10 to 15 percent to term crude volumes in May by leading OPEC producers Saudi Arabia, Kuwait and Iran.
Traders said the market will be keenly watching for signs of disruptions to Iraqi crude exports in June as the current phase of the oil-for-food program comes up for renewal by the United Nations.
The UN monitors all crude exported out of Iraq under sanctions slapped on Baghdad following the invasion of Kuwait in 1990. The current phase of the oil-for-food program began on December 5.
"You know what happened the last time, the rollover didn't go smoothly," one trader said.
Exports from Iraq have been erratic since late November when Iraq began demanding a surcharge from buyers.
Many Asian buyers have shied away from Iraqi crude because of the disruptions, but key importers India and Taiwan have continued to lift Basrah Light crude.
India and Taiwan also are due to buy other crude grades via tenders this week.