June Middle East crude trading on hold in Asia due to delayed OSPs

Singapore — Spot trading of June-loading Middle East sour crude cargoes is virtually on hold halfway through the month as market participants in Asia lie in wait for official selling prices from producers, these sources told S&P Global Platts Monday morning.

"Hard to trade anything with no OSPs and no knowledge of production levels as well," a crude trader with a Chinese trading firm said Monday morning.

Official selling prices, typically issued by Middle East producers in the first few days of the month, had been pushed back as producers grappled to address production cuts as part of a 23-nation OPEC+ alliance over the past couple of weeks.

The countries finally agreed to a 9.7 million b/d coordinated production cut over May and June late Sunday night, after negotiations dragged on for days.

With the challenging OPEC+ discussions out of the way, traders expect Saudi Aramco to take the lead in issuing official selling prices sometime on Monday, with other producers to follow.

"I've not yet seen the Saudi OSPs, probably [will be issued] today [Monday]," a market source with a refiner said.

The producer is expected to cut OSPs by $1/b to $4/b in step with declines in Middle East crude spreads over March, a Platts survey of OSP expectations revealed earlier this month.

But the current environment, clouded by political implications, low demand and a fight for market share among the same countries that agreed to a coordinated production cut late Sunday carries an element of uncertainty for official selling prices, traders said.

Other producers such as UAE's Abu Dhabi and Qatar Petroleum are likely to wait for Saudi Aramco to make the first move in order to suss out how much to cut prices for their own grades, market participants said.

"Everyone is waiting for Saudi" to issue their prices first, a third trader said, adding that "Qatar Petroleum clearly mentioned they will issue [OSPs] after Saudi."

Once OSPs from all producers are issued, refineries will then run linear programming models for various Middle East crude grades, traders said.

"The refinery has to wait for LP after OSPs come out," a fourth trader added.

The whole process, from OSP issuance, to determining June buy-side requirements, may take a week. Nominations for term contracted volumes will likely also take place simultaneously, they said.

Spot trading is expected to kick off after, which would leave barely two weeks for the market to wrap up June requirements before sliding into the next cycle.