Brent's narrowing premium over Dubai crude could help swing market conditions in favor of Oceania suppliers and price differentials for Australian North West Shelf condensate, which is linked to the European benchmark, could outperform rival Qatari grades this month, market participants said Wednesday.
The Brent/Dubai Exchange of Futures for Swaps spread -- a key indicator of ICE Brent's premium to benchmark cash Dubai, which enables holders of ICE Brent futures to exchange a Brent futures position for a Dubai crude swap -- has been narrowing sharply in recent weeks, making Brent-linked Oceania condensate more price competitive than Middle East ultra-light grades, regional traders said.
"[The narrow Brent/Dubai] EFS would put NWS condensate [sellers] in the driving seat," said a trader familiar with monthly Oceania crude and condensate sales.
The second-month Brent/Dubai EFS has tumbled to a more than one-year low in recent weeks.
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The EFS was assessed at $1.25/b on January 26, the lowest level since September 10, 2015, when the spread was $1.24/b, S&P Global Platts data showed.
The second-month EFS averaged $1.53/b so far this month, compared with $1.65/b in January and $2.18/b in December last year, Platts data showed.
The average for last month was the lowest recorded since averaging $1.54/b in September 2015.
"The issue is going to be [Indonesian end-users'] support for NWS condensate ... EFS is also quite narrow," said a sweet crude trader based in Singapore, adding that the Australian ultra-light crude will remain competitive compared with various other Dubai-linked grades.
NWS EXPECTED TO OUTPERFORM DFC, LSC
Four regional condensate traders surveyed by Platts earlier this week said they expect April-loading NWS condensate cargoes to trade at premiums of between 50 cents/b and $1/b to Platts Dated Brent
crude assessments on a FOB basis.
One trader said the price differential could reach up to Platts Dated Brent plus $1.50/b, though another trader said the premium could fall below 50 cents/b.
In comparison, most March-loading NWS condensate cargoes changed hands at premiums of around 70 cents/b to Dated Brent last month.
On the contrary, sentiment was rather tepid for Qatari ultra-light grades, with several traders expecting cash differentials for deodorized field condensate and low sulfur condensate to slip by at least 20-30 cents/b from the previous trading cycle.
For DFC, Qatar Petroleum for the Sale of Petroleum Products Limited, or QPSPP, could have sold via tender a 500,000-barrel cargo for loading in March to a North Asian buyer at a premium of around $2.80-$3.05/b to the Platts front-month Dubai crude assessments.
"[Qatar's] DFC traded [at] around [Platts front-month Dubai] plus $3/b and NWS was around [Platts Dated Brent] plus 70 cents/b [for March cargoes] ... consider the shorter travel distance, the narrow EFS and bigger cargo size, then NWS should be a better choice [for Asian end-users]," the Oceania crude trader said. APRIL PROGRAM
Meanwhile, the preliminary April-loading program for NWS condensate showed a steady stream of naphtha-rich crude supply for the month.
Four 650,000-barrel cargoes of NWS condensate are scheduled for export in April, unchanged from March.
BP holds one cargo for loading over April 3-7, while Shell holds the second cargo for loading over April 8-12, a regional trader with knowledge of the ultra-light crude's monthly loading program told Platts earlier this week.
Chevron holds the third cargo for loading over April 19-23 and the Japanese consortium of Mitsui and Co. and Mitsubishi Corp., or MIMI, has the fourth cargo for loading over April 26-30, the regional trader said.
"Production is steady and stable. There's no field maintenance planned in sight ... everything is uninterrupted," said a source familiar with condensate output in the NWS project.
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