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Qatari condensate’s price differential to Dubai crude flips to premium after 6 months as spot supply tightens

The price differential for Qatari condensates to Dubai crude flipped to premium July 16 for September loading cargoes after six months in discount as spot volumes shrink, market sources said.

Qatar Petroleum for the Sale of Petroleum Products sold two 500,000-barrels cargoes of low sulfur condensate via tender for September loading to South Korean buyers on July 16 at premiums in the range of flat to 50 cents/b to Platts Dubai crude assessments on an FOB basis, traders said.

QPSPP last sold via tender two 500,000-barrel cargoes each of deodorized field condensate and LSC for August loading to South Korean buyers at discounts of around $1.65/b and $1.75/b, respectively, to the same marker, market sources said.

The last time QPSPP sold condensate at a premium was last December, when it sold 500,000 barrels of DSC for February loading to an North Asian end-user at a premium of around $2.50/b to the same assessment a FOB basis. The last time it sold LSC at a premium was last November for January loading, at a premium of around $2.25b, traders said.

QPSPP usually offers both LSC and DFC in its monthly tenders, but for September loading is offering only LSC, according to the tender document seen by S&P Global Platts. All its DFC output has been allocated to term lifters, according to market sources.

“DFC is fully termed out,” a South Korean end-user source said, adding that the lack of DFC availability could strengthen price differentials further.

Supply tightness for other condensate grades in the region, including Australia’s North West Shelf condensate, was also supporting prices.

Three NWS cargoes have been seen in the market for September loading, compared with four for August loading, and two of them have higher mercury levels than usual, traders said.

“There are only limited buyers for high mercury cargoes,” a Singapore based crude trader noted. No spot trades for September loading NWS cargoes have been seen, traders said.

Platts assessed September loading DFC and LSC at premiums of 30 cents/b and 15 cents/b to Platts Dubai, respectively, at the Asian close July 16. The differentials were last assessed higher February 11 for DFC at 50 cents/b and February 4 for LSC at 20 cents/b, Platts data showed.
SUSTAINABILITY IN QUESTION

Market sources said the sustainability of the premiums for Qatari condensates was uncertain as production margins for naphtha and gasoline, as well as downstream petrochemicals, were weak.

“[LSC spot differentials] looks a bit expensive give the current economics,” the South Korean end-user source said. “Paraxylene margins are weak. Naphtha margins rebounded a bit last week, but they are now going down again,” the source added.

Several Asian producers have slashed operating rates for aromatics products such as PX, mixed xylene, benzene and toluene in July amid weak demand and increased supply, market sources said.

The spread between CFR Taiwan/China PX and CFR Japan naphtha physical was $163.80/mt at the Asian close July 16, up $18.75/mt, but still well below the typical breakeven of around $300/mt, where it has languished since March 19, Platts data showed.

Poor margins for aromatics have many Asian condensate splitters running at around 80% capacity, sources said.

The second-month naphtha crack against Dubai swap hit a more than two-year high of minus 10 cents/b July 9 but has since fallen steadily to a one-month low of minus $1.71/b July 16, Platts data showed.

Naphtha supply remains tight due to thin export volumes from the Middle East and India, although some easing iwas expected with US cargoes emerging for the September delivery cycle and demand falling due to cracker maintenance at Formosa’s complex in Taiwan and other steam crackers switching out some naphtha feedstock for LPG, sources said.

Reflecting the softer sentiment, cash differentials for spot paraffinic naphtha parcels were assessed at $23/mt at the Asian close July 16, down from a multi-month high of $30/mt July 6 against the key Mean of Platts Arab Gulf naphtha physical, FOB, Platts data showed.
Source: Platts

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