The crude oil market in Asia started the week lower mid-morning on Aug. 3, against a backdrop of rising coronavirus infections and increasing OPEC+ supply amid the pull back in production cuts. ICE October Brent crude futures stood at $43.27/b at 0200 GMT on Aug. 3, down 44 cents/b from $43.71/b at the 0830 GMT close in Asia on July 30.
MIDDLE EAST CRUDE
**The sour crude market is entering a new trading cycle, and the market is awaiting fresh rounds of official selling prices.
**The Dubai cash-futures spread, a key Middle East sour crude market indicator tracked by the market to define the direction and extent of price hikes or cuts, averaged at plus 74 cents/b in July, compared to an average of 84 cents/b in June.
**Prompt intermonth spreads were in a rangebound contango mid-morning on Aug. 3, with September/October pegged at minus 22 cents/b, compared with minus 25 cents/b at the Asia close on July 30.
**October Brent/Dubai Exchange of Futures for Swaps was pegged at 34 cents/b, up 3 cents/b from the Asia close on July 30.
**In the week beginning Aug. 3, the Asian sweet crude market will see the September-loading progam released for crude and condensate cargoes.
**In the condensate market, traders will be looking out for tender results from Indonesia’s Pertamina, which after a hiatus of three months is seeking condensate for H1 October delivery.
**Market participants would also be looking out for spot September-loading Australian North West Shelf condensate held by Mitsui, as well as the fresh October-loading program details for the same.
**Sell tenders for October-loading Low Sulfur Condensate and Deodorized Field Condensate are expected to be released by Qatar Petroleum in the week beginning Aug. 3, after no DFC was offered for spot sale in July.
**In the sweet crude market, tender results for Far East Russian Sokol crude offered by India’s ONGC is expected in the week beginning Aug. 3. Market participants will be closely following the results of this tender as it sets the precedence of the sweet crude trading cycle in Asia.
**Market participants would be watching out for OSPs for July-loading cargoes set to be released by Indonesia as well as Malaysia for their flagship crude grades, during the week.
DELIVERED CRUDE MARKET
**In the delivered market, sentiment is expected to remain bearish for November delivery cargoes, with demand from China weaker amid poor margins and stockpiling from previous purchases.
**Spot trade price differentials for October delivery Lula crude came down gradually through the month of July, with the most recent offer reported below $1/b to December ICE Brent futures, DES Qingdao basis, traders said. A similar trend is expected to continue for November delivery cargoes.
**Crude futures moved higher in July on the back of positive supply-side factors, fiscal stimulus measures and a weaker US dollar, despite persistent concerns over oil demand recovery amid a worsening coronavirus situation worldwide
**The prompt intermonth timespread for Brent swaps sank further into a contango, averaging at minus 41 cents/b in the week ended July 31, 15 cents/b lower than the minus 26 cents/b the previous week.
**While analysts expect Brent to consolidate at its current $40-$45/b trading range until the infection curve flattens and global demand outlook improves, downside risks such as OPEC+ and US onshore production are increasing.
**Global oil supply is set to increase this month as OPEC+ ended its record production cuts of 9.7 million b/d as scheduled, and eased into a lower 7.7 million b/d production cut in August.