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Asia Crude Outlook-China supports heavy sweets

SINGAPORE: Heavy sweet Asian crudes were expected to hold firm this week amid limited supplies of Indonesian grades, traders said on Tuesday.

Middle East crudes, meanwhile, were expected to continue to weaken as the March trading window winds down. Remaining barrels might struggle to find homes as most refineries were covered, traders said.

Equity producers of Indonesia's main crude Minas were offering barrels around ICP +$1.00 per barrel for March loading, much higher than the last trade around ICP +75/+85 cents and close to a two-year peak of ICP +90 cents traded in December.

"The market is firm because there are limited availabilities of Indonesian crudes," a Japanese trader said.

High global crude prices mean equity producers of Indonesian crude, which are repaid for their investment in crude, will receive lower allocations, traders said.

They said higher domestic demand also limited the volumes of Indonesian crudes available for export.

Traders said Chinese demand was expected to soak up the bulk of the remaining main heavy sweet barrels for March, adding to price support.

OMAN EDGES TOWARDS PARITY

Trade could be thin this week while China celebrates the Lunar New Year.

But sellers were not in a rush to sell and were likely to keep prices firm in anticipation of the China buying later this week or next week.

The last of the March Oman, Abu Dhabi and Qatar barrels were expected to find homes this week.

But premiums could slip from already low levels because most refiners were covered for the month, traders said.

March Oman last traded around MOG plus two cents per barrel, similar to deals done late last week.

The levels were a far cry from the MOG +18/+20 cents achieved in initial deals for March Oman.

Traders said the high MOG base price-Oman raised its OSP over Dubai by 12 cents to Dubai +$1.23 per barrel has put the crude under pressure in the spot market.

In addition, China is showing reduced demand and Japan is preparing for a refinery maintenance period, which could all combine to push the spot price towards parity.

For April dates, Oman was likely to stay under pressure following the hike in the OSP over Dubai.

"I think the increase was too much and it will probably lead April Oman to start on an unhealthy note," said a trader with a major oil company.-Reuters