Angola's Cabinda-Dalia crude spread widest since October 2011
London (Platts)--30Nov2012/759 am EST/1259 GMT
The differentials spread between Angolan crude grades Cabinda and Dalia
has reached its widest point in more than a year, as the market shuns the
heavier Dalia in favor of the lighter, more popular Cabinda, market sources
On Thursday, Platts assessed Cabinda at Dated Brent plus $0.385/barrel,
and Dalia at Dated Brent minus $1.665/b, resulting in a $2.05/b spread, the
widest since October 18, 2011.
The disparity in the two grades' values stems more from Dalia's waning
demand than from the steady support seen for Cabinda.
As has been the case in recent months, Cabinda's monthly program is
already sold out for January, with Taiwan's CPC leading an early buying
spree, scooping up four of the six available cargoes via tender.
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This represents the largely monthly purchase of Cabinda by CPC since the
China's Unipec picked up the final two Cabinda cargoes soon after,
cleaning up the January program.
That demand has sent Cabinda differentials on a steady upswing. Since
November 6, when Cabinda was assessed at Dated Brent plus $0.125/b, its
differentials have climbed a cumulative 26 cents.
Dalia, on the other hand, has been on a bearish trajectory for the last
few months, as demand for the grade weakens. Since September 29, when Dalia
was assessed at Dated Brent minus $0.525/b, its differential has dropped by a
The grade's January program still has three of six cargoes available.
"The main thing is the fuel oil cracks," a market source said of Dalia's
weakness. "There are many heavy grades around, and that puts pressure on
Dalia contains the second highest concentration of residual fuel among
Angolan grades, following only Kuito.
The low sulfur fuel oil crack spread -- the relative price of fuel oil
to ICE Brent front-month crude futures -- has fallen to minus $15.54/b, the
weakest level since April 28, 2011.
Also hurting Dalia is its high acidic content, sources said. Dalia's
acidity of 1.5 mg KOH/gm is among the highest in West Africa, with only
Chad's Doba, and Cote d'Ivoire's Baobab higher.
With the recent uptick in VLCC freight rates between West Africa and
Asia, Chinese refiners, the traditional key buyer of Dalia, are opting
instead for the closer Middle East acidic crudes, sources said.
The reverse in Dalia fundamentals marks the end of a bullish run for the
grade during the first two-thirds of 2012.
"In August, Dalia was very popular, and it sold quickly," a source said.
As such, in early-September the spread between Dalia and Cabinda was
only 75 cents, the most narrow since December 2010.
--Robert Mayer, firstname.lastname@example.org
--Edited by James Leech, email@example.com