--Clyde Russell is a Reuters market analyst. The views
expressed are his own.--
By Clyde Russell
LAUNCESTON, Australia, Jan 20 Oman futures, one
of the main benchmarks for Asian oil buyers, may this year break
a seasonal pattern of rising in the first quarter before
dropping in the second.
The front-month contract, listed on the Dubai
Mercantile Exchange, has for the past two years climbed in the
first part of the year before declining in the weeks thereafter.
This fits the pattern of Asian winter demand followed by the
spring lull, which typically sees many refineries across the
region go offline for maintenance.
Last year, Oman futures climbed 6.9 percent from the start
of the year to its second highest peak for the year at almost
$114 a barrel on Feb. 14. They then declined 15.1 percent to
last year's low of $96.62 on April 17.
In 2012, the Oman contract gained 17 percent to peak at
$125.33 a barrel on March 14, before sliding 30 percent to a low
of $87.81 on June 22.
Interestingly, prices recovered over the rest of 2012 and
2013, finishing near where they had started for the two years.
So far this year, however, it would appear Oman futures
aren't getting this first-quarter boost. They haven't rallied
and were down nearly 5 percent to $103.32 a barrel by the close
on Jan. 17.
While Asian refinery margins have improved in
recent weeks, the profit from processing a barrel of Dubai crude
at a complex refinery in Singapore is only just above the
365-day moving average.
That benchmark processing measure was at $6.37 a barrel on
Jan. 20, above the $6.16 365-average, but below the $8.33
refiners were earning in June last year.
Refiners may be keeping runs low in order to keep product
markets relatively tight and support the margins, which would
also help explain why Oman futures have not rallied this year.
STEADY CRUDE DEMAND
Oil demand in Asia for January appears to be largely steady
from December, according to estimates from Thomson Reuters Oil
Analytics, which put seaborne arrivals in the region for the
current month at just over 80 million tonnes, or about 18.9
million barrels per day (bpd).
Top Asian consumer China is expected to import about 23
million-24 million tonnes by sea, and if pipeline imports remain
steady at the 2 million tonnes assumed by the oil analytics
team, China's total imports in January will be near the record
26.78 million tonnes of December.
China's imports have been recently boosted by the start-up
of two major refineries, which have had to build up working
inventories and will contribute to ongoing crude demand.
While Chinese demand is expected to remain at high levels,
other top consumers such as Japan and India are likely to trim
imports this month.
Coupled with the steady demand outlook in Asia is the
possibility of more Iranian oil becoming available from late
January onwards as part of a deal between the Islamic republic
and six major powers to ease Western sanctions aimed at forcing
Tehran to open its nuclear programme to international scrutiny.
Neighbouring Iraq is at the same time ramping up exports,
with cargoes leaving the southern region averaging 2.35 million
bpd in the first 15 days of January, up from the 2.08 million
bpd average across December.
The picture that emerges for Asian oil markets overall so
far in 2014 is one of steady demand, with refiners facing margin
pressures amid ample crude supply.
That doesn't provide a bullish backdrop for the region, and
it wouldn't be a surprise to see major suppliers such as Saudi
Arabia lowering the premiums on official selling prices for
March cargoes at the start of next month.
(Editing by Tom Hogue)