Asian crude traders expect premiums for ADNOC grades in Jan spot market
Abu Dhabi National Oil Company’s four crude grades are expected to fetch premiums in spot market trading over the month of November as a result of healthy winter demand combined with measured price hikes from the emirate, Asian crude traders said.
“ADNOC has been reasonable compared to other OSPs [official selling prices],” said a trader based in Singapore following the release of OSPs by the Abu Dhabi National Oil Company midweek.
Asia will trade January loading barrels in the Middle East sour crude spot market this month.
“Murban and the lights should trade up, even though the OSP is quite high already, but due to winter demand,” the head of a crude trading team said on Thursday.
ADNOC issues OSPs for its four crude grades as outright prices, but market participants pay closer attention to the month-on-month change in the spread of the outright price to the average of Platts cash Dubai assessments.
ADNOC’s Murban crude OSP differential against Dubai went up 14 cents/b to $4.23/b, for cargoes of the light sour crude that loaded in October. The OSP differential for its medium sour crude grade, Upper Zakum, rose 34 cents/b to $2.88/b month on month.
Both Murban and Upper Zakum are grades deliverable into the Dubai partials convergence mechanism in the Platts Market on Close assessment process. Delivery of Murban into the Dubai basket requires payment of a quality premium due to the grade’s light sour profile.
Upper Zakum, with a medium sour slate, is closer to the Dubai crude profile and does not require a quality premium if declared into a convergence of Dubai partials.
Traders expect the medium sour ADNOC crude to fetch premiums in spot trading over the month of November due to robust demand for such grades in Asia.
“Medium sour [supply] is still tight, Upper Zakum [will] still fetch premiums” in the spot market, the second trader added.
Cash Dubai’s premium to futures — known as the M1/M3 spread — has averaged $2.67/b over November so far, something spot traders will compare against the Upper Zakum OSP differential of $2.88/b when trading the grade this month.