Mideast crude oil cargoes trade at discounts despite Iran shortfall -sources
Spot Middle East crude oil cargoes are trading at discounts in Asia after OPEC producers increased supplies to replace Iranian oil and as natural disasters crimped demand from Japan, industry sources said.
The market has unexpectedly weakened this month for cargoes loading in December, with most grades ranging from light-sour Murban from Abu Dhabi to Qatar’s Land and Marine crude trading at discounts to their respective price markers.
That is in sharp contrast to last month, when spot premiums for November cargoes hit multi-year highs as buyers scaled back on Iranian oil imports ahead of U.S. sanctions on Tehran that start from Nov. 4.
Saudi Arabia, Kuwait and the United Arab Emirates have increased exports to Asia after the Organization of the Petroleum Exporting Countries and Russia pledged to boost output to stabilise global oil prices after they hit four-year highs.
“Refiners (last month) asked for a lot of Saudi incremental oil,” said a trader with a North Asian refiner, helping explain why there has been so much Saudi supply this month.
The sources, who declined to be identified as they were not authorised to speak with media, said Saudi Aramco was increasing Arab Extra Light supplies to some refiners in northern Asia.
That comes after other sources previously told Reuters that Aramco is supplying buyers in India with 4 million barrels more oil. Aramco does not typically comment on commercial transactions.
Abu Dhabi National Oil Company and Kuwait Petroleum Corp have also both launched new crude grades that will add a total of about 170,000 barrels per day of light oil supply.
“There is ample supply of light sour crude – Arab Extra Light, ADNOC grades and (Kazakhstan’s) CPC Blend,” said a second trader with a North Asian refiner.
The arbitrage for crude produced in the Atlantic Basin and the United States to Asia has also opened after Brent’s premium to Dubai swaps DUB-EFS-1M narrowed and as grades such as CPC Blend trade at deep discounts, traders said. BFO-CPC
Despite the supply, Asia’s actual spot demand was lower than expected, the first trader said, because of a lower appetite from Japanese refiners after operations at their plants were hit by typhoons and an earthquake in September and October.
“Our utilisation rate is not so high currently, so our spot purchases are at a minimum quantity,” said a Japanese oil buyer.
Refiners such as Idemitsu Kosan Co and JXTG Nippon Oil & Energy Corp are resuming operations at their plants in Hokkaido and Osaka after some units were shut for a month.
Refiners have also turned cautious after complex margins at a typical Singapore refinery dropped to the lowest in three months DUB-SIN-REF driven by ample gasoline supplies.
Source: Reuters (Reporting by Florence Tan; Editing by Joseph Radford)