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Malaysian crude June trading cycle kicks off under strong downside pressure

Singapore (Platts)--21 Apr 2017 123 am EDT/523 GMT


Price differentials for June-loading Malaysian crude cargoes faced strong downside pressure Friday, weighed by hefty supply of light and medium sweet crude barrels from Southeast Asia and Oceania for the month.

Petroleum Brunei kicked off the June trading cycle for light sweet Malaysian grades on a bearish note this week, with the Southeast Asian supplier receiving weaker premiums for its Kimanis crude cargo.

Latest market talk indicated that Petroleum Brunei could have sold a 600,000-barrel cargo of the light sweet Malaysian grade for loading June 4-8 to Thailand Integrated Services at a premium of around $1.10-$1.50/b to the Platts Dated Brent crude assessments on an FOB basis, sharply lower than the premiums of around $2.20/b that regional buyers paid for May-loading cargoes in the previous trading cycle.

Taking the latest spot trade deal into consideration, Kimanis crude was assessed at a premium of $1.40/b to Platts Dated Brent crude assessments on an FOB basis Thursday, the light sweet grade's lowest-ever price differential reported by S&P Global Platts.

Platts began daily assessments for Kimanis crude on February 10, 2016.

June loading program for Malaysian Kimanis crude
LoadingBarrelsEquity
June 1-5600,000Petronas
June 4-8600,000PetroBrunei
June 7-11600,000Conoco
June 10-14600,000Petronas
June 13-17600,000Shell
June 16-20600,000Petronas
June 19-23600,000Pertamina
June 22-26600,000Conoco
June 25-29600,000Petronas
June 28-July 2600,000Shell


"It's going to be a bloody month," said a trader with a Japanese trading company, indicating that Malaysian crude suppliers would have to fend off competition from numerous trading houses and producers from Vietnam and Australia looking to sell their share of light sweet crude barrels for June. Platts previously reported that various trading firms could offer a combined total of around 2.5 million barrels of Vietnamese light Bach Ho crude into the Asian secondary market.

Adding to the already growing pool of regional light and medium crude supply, a variety of low sulfur Australian crude grades including Barrow Island, Varanus, Cossack and Mutineer are also available for sale in the spot market this month.

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"I am sure [Malaysian crude] sellers want to sell [their June barrels] as quick as possible and they are already on the move... the longer they take [to clear cargoes] the deeper the premiums could fall," the trader added.

Trade sources said Petronas was already offering some of its Miri crude barrels for loading in June. Market talk indicated that the Malaysian producer was recently seen offering a parcel of Miri crude at Dated Brent plus $2.50-$2.70/b.

"Buyers are thinking much below that... I doubt it will sell anywhere near that level," said a Southeast Asian sweet crude trader.


JUNE KIMANIS PROGRAM


The preliminary June-loading program for Kimanis showed ample supply of the middle distillate-rich crude for the month.

A total of ten 600,000-barrel cargoes of the light sweet Malaysian grade are scheduled for export in June, one more than in May.

Malaysia's state-owned Petronas will load four of the 10 cargoes out of the Sabah Oil and Gas Terminal.

Shell and ConocoPhillips were allocated two cargoes each, while Petroleum Brunei and Indonesia's Pertamina hold one cargo each.

The four Petronas cargoes are expected to load June 1-5, June 10-14, June 16-20 and June 25-29 respectively.

Shell is likely to have its cargoes loading over June 13-17 and June 28-July 2, while ConocoPhillips is scheduled to export its cargoes around June 7-11 and June 22-26.

Trade sources said Pertamina is expected to take its equity cargo loading in June 19-23 into its own system.

--Gawoon Philip Vahn, philip.vahn@spglobal.com
--Edited by Wendy Wells, wendy.wells@spglobal.com

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