SINGAPORE: Premiums for May-loading regional crude and condensate are under pressure from a crash in light distillate refining margins and a supply glut caused by increased arbitrage flows to the region.
Asian refining margins suffered their biggest weekly fall in more than six months last week after Singapore gasoline prices tumbled in line with US values and naphtha slumped on fears of rising exports from Western producers.
Gasoline and naphtha refining margins have both fallen by close to 40 percent since mid-February and are expected to remain weak amid rising arbitrage flows from the west.
The weakness in light distillate refining margins has already begun to weigh on regional condensate premiums, with most recent deals for April-loading Australian North West Shelf (NWS) condensate dipping by about 10 cents per barrel from earlier deals, to around 80 to 90 cents above dated Brent.
May NWS condensate supplies are steady at four 650,000-barrels from April volumes, two traders with direct knowledge of the grade's loading programme said on Tuesday.
More offers for Vietnamese crude were released on Tuesday, with the state-marketer offering two 300,000-barrel cargoes of Te Giac Trang (TGT) crude.
The offers came as a surprise as January-June TGT crude supplies were sold on a term basis to Repsol at a premium of around $2.30 per barrel to dated Brent last October.
Premiums for the Vietnamese grade, which is a light crude that yields mainly light distillates, are likely to be lower than the term price, with some traders valuing the cargoes at a premium under $1 per barrel amid weak naphtha and gasoline refining margins.
Brent's premium to Dubai swaps, or Brent-Dubai Exchange of Futures for Swaps (EFS), was at $1.56 per barrel, up 2 cents for May.
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