*China’s New 0.5% Contract*
The new contract will launch Monday on the Shanghai International Energy Exchange (INE). This development follows the news that 20 Chinese refineries are ready to provide the new IMO compliant fuel. China removed a consumption tax on fuel oil this year and issued its first-ever supply quotas for 10 million tonnes of the new 0.5% sulphur marine fuel. It’s expected that the new contract will attract strong interest from industry players.
*OPEC Cuts Puts Dubai in Backwardation*
Front-month Dubai crude spreads moved further into backwardation early this morning after pressure was put on OPEC+ to fulfil their respective cut levels. The spreads moved following reports that Iraq and Kazakhstan have submitted plans to the OPEC+ alliance on how they will implement deeper oil production cuts in coming months, following through on pledges to make good on violating their quotas in May.
*Demand Back On Track*
Brent futures structure has flattened significantly its contango shape at the front of the curve, signalling that demand is coming back to the market. Gasoline futures in the U.S. moved into backwardation for the first time in three months on Thursday, a bullish signal indicating supplies are tightening as the summer driving season gets under way. Also, the number of oil-laden tankers parked in Chinese waters has swelled since the start of the month with almost 200 ships expected over the course of June.
*Gasoil Premiums Continue to Climb*
Asia’s cash premiums for 10-ppm gasoil climbed further on Thursday, buoyed by steady demand in the physical market, while weekly middle distillate inventories in Singapore dropped to a 10-week low. The Jul/Aug spread on the Sing 10ppm remains positive, signalling spot demand for the product compared to the contango on the rest of the year futures prices. Onshore middle distillate stocks in Singapore fell 5.9% to 13.979 million barrels in the week ended June 17, Enterprise Singapore data showed.