Murban overhang weighs on light sour crude sentiment in Asia

Singapore — An overhang of unsold Murban crude cargoes from December is likely to pull spot market differentials of light sour crude lower in January, despite price cuts from Middle East producers, market participants in Asia told S&P Global Platts Tuesday.

"Feb loading, there are still a few cargoes left of Murban," a sell-side source said.

Some sellers estimated that around 15 cargoes (7.5 million barrels) of February-loading Murban was left unsold from December. Cargoes of the Abu Dhabi crude available did not clear as quickly as hoped for by sellers in the spot market last month due to an unforeseen switch in refinery buying appetite, along with a narrower trading window due to year end seasonal holidays, traders said.

The cargoes are now being offered at deep discounts compared with price levels in December in an effort to clear them before trading for the next cycle kicks off.

"February cargoes close to minus $1/b down," the source told Platts.

Murban cargoes scheduled to load over February traded in a wide range over December. Spot market trading began at small premiums of around 10-20 cents/b to the OSP in December, but prices fell quickly into small discounts as buyers switched gear from light to medium sour purchases.

Several refiners were seen picking up grades like Upper Zakum instead of their monthly Murban cargoes, with sellers forced to offer deeper discounts as the month wore on without buyers in sight.

The grade was offered as low as minus 60 cents/b to its OSP toward the end of December.

But February cargoes remain unsold despite a downward correction in offers, which is expected to add pressure to the current cycle for March loading light sour crude, traders said.

"Trading hasn't really started, but seems the lights are pressured a lot more again," the sell-side source said.

"No deals yet, but [March] offers are down to OSP minus 30 cents/b," a crude trader based in Singapore said.

The discounted March offers have priced in cuts to official selling price differentials for Murban. Abu Dhabi National Oil Company released its official selling prices for December loading crudes earlier this month, with OSP differentials for its three light grades down 27 cents/b each from November levels.

The OSP differential for December loading Murban versus Dubai stands at $4.36/b, compared with $4.63/b for November.

Platts front-month Dubai crude assessments averaged $64.89/b over December 2019.