20000321

Asia Crude Outlook-Gulf steady as May starts firm

SINGAPORE: MidEast crudes were expected to be steady this week after the first May Oman barrels fetched slight premiums over the official selling price, traders said on Monday.

But they said activity would likely be thin pending Opec's March 27 meeting, which would decide the group's output after the expiry of the supply curb deal at the end of the month.

"It's still very early for May trade, and with the Opec meeting coming up, I think people will be wary of doing a lot of deals yet," said a Western trader.

Oman crude, for May lifting, started last week, with deals done at around five cents per barrel over the Ministry of Oil and Gas (MOG) official price, traders said.

The price compared with the last April Oman deals done at a premium of one cent over MOG.

The firmer price was a reflection of improved refining margins in Asia, and expectations of increased demand from China.

Traders said May trade for Abu Dhabi crudes was still quiet, but bids were at three to four cents per barrel over the Abu Dhabi National Oil Co (ADNOC) official price, in line with last April deals done around ADNOC +5 cents.

They said middle distillate-rich Abu Dhabi grades would trail Oman's price recovery, as a fall in kerosene demand and refinery maintenance shutdowns curb Japanese second quarter buying.

TIGHT SUPPLIES PLAGUE ASIA

But for Asian crudes, traders expected premiums to hold firm at least into early May, as supply tightness continues to plague the regional market.

Lower output at Australia's Cossack field due to bad weather, coupled with a cut in April exports of Vietnam's Bach Ho following repairs at the single buoy mooring (SBM), was limiting availabilities, traders said.

Aggravating regional supply tightness was also the lack of swing supplies from West Africa heading to Asia, as the Brent/Dubai spread -- seen around $2.30 per barrel on Monday -- was too wide.

West African cargoes, priced against Brent, usually head east when Dubai prices rise to within $1.50 of Brent.

Traders estimated that only 630,000 barrels per day of West African crude would arrive in Asia in May, which was up slightly from April arrival volumes, but down from well over a million bpd that moved east late last year.

Traders said Indonesia's Cinta crude last traded around 80 cents over the Indonesian Crude Price (ICP), the highest spot premium since June. -Reuters