Crude oil futures face conflicting pressures over May 4-6 from reduced demand in China and the EU set to consider imposing an embargo on Russian supply.

At 0215 GMT May 4, front-month July ICE Brent crude futures stood at $105.86/b, up 89 cents/b (0.85%) from the May 3 settlement.

Middle East crude

** Official selling prices for June-loading barrels from Middle Eastern producers are due for release this week, and an OPEC+ meeting scheduled for May 5.

** Saudi Aramco is expected to lower OSPs across all its grades bound for Asia, with other producers expected to largely follow suit.

** Demand cues remain sluggish from China and Japan as China strives to contain a coronavirus outbreak while Japan marks Golden Week holidays ahead of refinery turnaround season.

** India and South Korean remain key demand pillars in Asia as refinery run rates remain healthy, and their demand for oil and products could edge higher.

** The Dubai cash/futures (M1/M3) spread averaged $3.27/b in the week to April 29, narrowing from $3.93/b the week before.

** Intermonth spreads were wider during Asian mid-morning trade May 4, with July-August pegged at $1.54/b, narrowing 29 cents/b from the Asian market close April 29.

** The July Brent-Dubai Exchange of Futures for Swaps was pegged at $7.52/b mid-morning May 4, down 42 cents/b from the Asian close April 29.

Asia-Pacific crude

** Cash premiums for condensates, especially Australian grades such as North West Shelf, will be closely watched this week amid constantly weakening naphtha cracks.

** Demand for lighter regional grades is expected to be strong as upcoming summer demand for gasoline could further boost spot premiums.

** Trade for Russia’s Sokol and Sakhalin crude are also being closely watched. A tender for June-loading Sakhalin crude was issued last week and awarded, though details were not known, while Russia’s Rosneft has issued a tender offering May-loading Sokol cargoes, the result of which is expected later this week.

** The outcome of Pertamina’s tender seeking crude and condensate for June and July arrival is awaited. The tender closed April 27 with validity until April 29.
** Traders are also awaiting the release of the February Brunei Crude Oil OSP and differentials, and Indonesia’s April OSPs this week.

Delivered crude

** WTI Midland differentials could remain weak in May, allowing buyers in Asia to seek more barrels of the US grade.

** The weak demand outlook from China will continue to pressure sentiment for Brazilian Tupi.

Crude futures

** Oil prices appeared poised for a breakout in coming days as the daily candlestick chart for ICE Brent crude showed a triangle pattern forming in recent weeks. Investors are digesting conflicting signals of reduced demand from China, while the EU is set to propose an embargo on Russian oil in its next sanctions package against Moscow this week.

** Ship-tracking data showed Russian oil being diverted elsewhere in a rearranging of international crude oil flows, as buyers in Asia pick up the slack amid falling imports by European buyers.

** India imported 627,000 b/d of Russia’s Urals crude in April, up from 274,000 b/d in March and zero in February, according to data from commodity intelligence firm Kpler.

** The broader financial markets also remain skittish over the US Federal Reserve’s open market committee meeting later May 4, where it is widely expected to raise its key interest rate by a half-percentage point, with more aggressive hikes set to be announced for the rest of its meetings this year. Any hawkish moves by the Fed will strengthen the US dollar, which will in turn affect demand for dollar-denominated oil.
Source: Platts