CRUDE MOC: Dubai, Oman spreads sink past minus $10/b despite Saudi price cuts

Singapore — Middle East sour crude benchmark spreads for cash Dubai and Oman crudes sank further Tuesday, as the outlook for demand recovery remained bleak despite heavy price cuts offered by Saudi Aramco, the largest crude exporter in the Middle East.

June cash Oman's premium to June cash Dubai also shrank, averaging nearly flat for the month-to-date as practically non-existent buying activity in the physical market chips away at demand for the medium sour crude.

The June cash Oman/Dubai spread has averaged 3 cents/b so far in April, down from an average of 31 cents/b over the month of March for the May cash Oman/Dubai spread, Platts data showed Tuesday.

Oman frequently trades at a slight premium to Dubai due to its favored grade status among Chinese refiners, where it is a refinery feedstock staple.

However, lower buying appetite from Asian refiners in recent months has led to a surplus of crude barrels, including Oman, unsold from April and May trading cycles. This is adding further pressure to spot market differentials for cargoes available in the current June trading cycle, said market participants.

Physical crude cargoes for June loading are expected to see a pickup in trading activity once a wider set of official selling prices has been released by producers in the Middle East, they added.

So far only Saudi Aramco has issued its OSPs for May-loading cargoes.

As of Tuesday evening in Asia, there was still no sign of other producer-issued OSPs, which have been delayed far beyond their expected initial release sometime in the first week of April.

Official selling prices are key inputs for refinery valuation models each month, allowing buyers to evaluate which grades to pick up at values best suited to their monthly production plans.

Aramco on Monday slashed its Asia-bound May OSPs by $2.95/b-$5.50/b from the prior month's OSPs -- exceeding market's expectations of $2-$3/b cuts as per a survey published by Platts earlier this month.

Buyers, meanwhile, were in no rush to begin procurement for the current cycle, and were waiting for other producers to release their prices in order to gauge the best value among Middle East crude grades.

"[We are] not in a hurry to buy, I am sure other producers will cut prices too," a Singapore-based crude oil trader with a state-owned Chinese company said.