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Analysis: Middle East sour crude premiums rise despite OSP hikes

Singapore (Platts)--16 May 2018 1119 pm EDT/319 GMT


Price differentials for Middle East sour crudes are fetching firm premiums in the spot market, despite steep hikes in official selling prices from producers earlier in the month, according to market sources this week.

OSP hikes from producers typically prompt buyers to pay lower prices for those grades in the spot market to compensate for the rise. However, robust summer demand from Asian refiners and a dip in availability of certain sour crude grades are holding value at or above levels seen last month, traders told S&P Global Platts.

"Everything is high right now," said one end-user on Wednesday.

"Demand is very healthy," added a producer.

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"The market is asking [us] for more [spot cargoes] but unfortunately we have committed [those barrels]," he added.

Product margins have registered gains across the board in May compared with last month, leading Asian refineries to ramp up summer production.

The July swap spread between Dubai crude and Singapore gasoil has been valued at $16.03/b in the month to date, up 24 cents/b from April. Similarly, the jet/Dubai crude swap spread has risen 23 cents/b on the month to be valued at $15.94/b as of Wednesday.

Fuel oil cracks were also rising, with the July Singapore 380/Dubai crude spread up 45 cents/b to minus $6.75/b so far this month.

Buyers moved quickly this week to secure barrels of medium sour crude grades, and several more were putting out fresh requirements as of Wednesday.

A 500,000 barrel cargo of Murban crude was heard to have been sold to a Japanese buyer at a premium of around 22 cents/b to the crude grade's OSP, sources said. Last month, several Murban cargoes had traded in a similar price range.

At least two 500,000 barrel clips of Abu Dhabi's Upper Zakum crude were also sold as of Wednesday, at premiums of 28 cents/b and 33 cents/b to the crude's OSP, respectively. Last month, Upper Zakum had fetched premiums of around 25 cents/b to the OSP.

Several Japanese end-users are actively seeking multiple clips of Murban, Das Blend and Qatar Land for July loading, sources said.

However, a dearth of Qatar Land and Qatar Marine cargoes this month may tighten spot market supplies and contribute to higher margins, sources said.

A clip of Qatar Land recently moved at a premium of around 10 cents/b to the OSP, and Qatar Marine was heard sold at a 30 cents/b premium, a source familiar with the matter said Wednesday.

Qatari Al-Shaheen crude has also seen active trading in the spot market this week, with several cargoes bought quickly before and after a monthly tender issued by QP.

Cargoes for Al-Shaheen, including those awarded in the tender, fetched premiums ranging from $1.10/b to $1.25/b to Dubai. Some were rumored to be even higher, according to sources.

Last month, Al-Shaheen traded in a range of 85 cents/b to 95 cents/b over Dubai.

--Eesha Muneeb, eesha.muneeb@spglobal.com

--Edited by James Leech, james.leech@spglobal.com




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