But any potential rise in premiums of the middle east crudes will likely be capped by refinery run cuts and continued depressed margins in Asia, traders said.

Oman is also suffering because of the imports of one million barrels per day of West African grades in July, traders said. They said July Indonesian Minas, the benchmark for heavy crudes, started trading last week at a firm premium of around 78 cents per barrel to the official Indonesian Crude Price (ICP).

For June, Minas barrels had last traded at ICP, plus 65 cents.

Traders said the lack of conclusion between China and Japan on the 1999 Daqing price talks was keeping buyers nervous about potential Daqing availabilities for July, prompting them to look at some alternative supplies. Japan has invited China oil officials to continue the talksin early July, after a first found of talks in Beijing earlier last month broke down.

"For July, buyers may start buying some insurance cargoes," said a trader with a Japanese oil company. This, coupled with forecasts of healthy buying by north Asian utilities to meet peak summer demand, would keep premiums from falling, they said. But the middle east crudes are expected to move sideways and remain around the current single digit premiums for the remaining July cargoes.

"There's still a bit of trading to be done for Abu Dhabi crudes, and prices could move up a little, but it won't be much," said a trader with a major oil company. Traders said run cuts by Singapore refiners were adding another bearish element to the market already pressured by weak margins.

Shell Singapore said on Tuesday it would run its 59,000 tonnes per day (TPD) (435 barrels per day) refinery at 36,000-38,000 TPD for June, compared to average 40,000 TPD it ran in May.

Singapore Refining Company (SRC) also said it would cut its Juneruns at its 285,000 barrels per day (BPD) refinery to 250,000 BPD.