Singapore (Platts)--4Nov2008

Asian sweet crudes prices have crumbled in recent weeks, as demand from
regional refiners has come to a near standstill due to tumbling refining
margins and rising inventories for some refined products.

"It's ugly," one trader said Tuesday.

In one instance, Western trader Vitol could not place a 100,000 barrel
cargo of Indonesian medium sweet crude Minas for December lifting, despite
offering it at flat to the Indonesian Crude Price for Minas.

In recent weeks, prices for naphtha in Asia have tumbled to a five-year
low as tepid petrochemical demand and cracker run cuts have led naphtha
inventories to swell.

Prices for sweet crudes had been supported somewhat a few weeks ago as
regional grades are generally rich in naphtha and fuel oil, which until late
October was at a crack of minus $4/barrel to Dubai crude.

But fuel oil prices have started to come off as well in the last two
weeks and the 180 CST fuel oil crack against Dubai crude has softened to
around minus $11/b, prompting end users to back off from building up stocks
for crude oils.

Regional producers then started to dump excess barrels onto the spot
market, adding further pressure to an already depressed crude market.

In late October, Vietnam's state exporter Petechim floated tenders to
sell a massive 2.75 million barrels of various grades of sweet crudes for
December loading. The tenders closed last Friday, but none of the cargoes have
been concluded so far.

Indonesia's BPMigas then followed up by issuing a tender last last week,
offering 400,000 barrels of Duri and 600,000 barrels of Belanak crude for
November loading. The tender closed Monday, and according to a few traders
there were no bids submitted.

BPMigas and Indonesian producers were heard to be quietly offering
leftover barrels of November-lifting crudes of various grades such as Minas,
Cinta, Ardjuna and Geragai.

Malaysia's Petronas was also heard to be in the market to sell light
sweet crudes Tapis, Miri and Kikeh.

No end appears to be in sight though for the downturn, as some traders
think that Asia's refiners could potentially look to cut runs very soon.
--Calvin Lee, calvin_lee@platts.com