SINGAPORE: Ample supply and weak demand continued to weigh on the Asia-Pacific crude market on Tuesday, as some traders considered storing crude for sale in future months.
Attention shifted to November-loading cargoes, as most regional grades loading in October had sold out. Malaysia's Kikeh and Kidurong may still be available in the market, a trader said, although no details were available.
Traders expect the market for November to be steady or slightly stronger than the previous month with refining margins improving in recent weeks, although it remained unclear if the pickup is due to stronger end-user demand or traders putting crude into storage.
Brent crude for prompt delivery remained cheaper than in future months - a market structure known as contango.
"Everyone is now looking at the contango play," a trader said, referring to storing crude in tanks or on vessels in expectation that the price will rise.
About 50 million barrels of crude is held in storage, split between Saldanha Bay in South Africa and Asia, the highest level since the last peak during the contango of 2008 and 2009, according to estimates by analysts at Energy Aspects.
Still, traders said it was very difficult to estimate the volumes going into storage, both in vessels and onshore in countries like China and South Korea.
"(Asian) demand is still not good, and crude being put into storage only means additional supply in the following months," another trader said.
"It's not easy to clear this oversupply. Refining margins are better and the turnaround season is soon over, but it takes time," he said.
Adding to the current glut, Libya's oil output has risen to 740,000 barrels a day, a spokesman for state-run National Oil Corp (NOC) said.
Brent-Dubai Exchange of Futures for Swaps (EFS), or Brent's premium to Dubai swaps, narrowed 5 cents to $1.25 a barrel.
TENDERS
South Sudan closed a tender to sell three 1 million barrel-cargoes of Dar Blend loading in October.
REFINERY
Japan's Showa Shell Sekiyu KK said its affiliate Seibu Oil would begin a scheduled maintenance of its 120,000-bpd crude distillation unit (CDU) at the Yamaguchi refinery for about two weeks from Tuesday.
MARKET NEWS
Rosneft is cutting staff and production and selling stakes in Siberian fields in the strongest evidence to date that Western sanctions are hurting what was the world's fastest growing oil firm in recent years.
U.S. oil production from the country's fastest-growing shale plays is set to rise by some 97,000 barrels per day in October from a month earlier, projections from the U.S. Energy Information Administration showed on Monday.
South Africa is looking to resume oil imports from Iran, once its biggest supplier of crude, and hopes to resolve "sanction issues" that have blocked purchases within the next three months, its deputy foreign minister said on Tuesday.
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