ADNOC allocates full July term supplies to some Asian buyers: sources

Abu Dhabi National Oil Co., or ADNOC, has allocated full term volumes to a few buyers in India and China for July-loading crude, according to market participants surveyed by S&P Global Commodity Insights May 4.

Allocations to other refiners in Asia could not be immediately confirmed.

ADNOC could not be reached for a comment by S&P Global.

Full term allocations are no longer a surprise for Asian refiners as Middle East producers have been constantly increasing production over the past several months, sources said.

"Fully allocated as usual," a trader with a North Asian refinery said.

However, some buyers may not be seeking incremental term barrels for July as they prefer to wait and see how the market shapes up for the July-loading trade cycle which commences this week, sources said.

"OSP is very tricky. For Murban it is OK, but Das [Blend], Umm Lulu and UZ [Upper Zakum] OSPs [may] not [be] reasonable [so] if ADNOC asks us to lift incremental [volume], we are not sure," a trader in Singapore said.

ADNOC sets the OSP differentials of the three grades against Murban crude's OSP. Murban OSP is set using the monthly average of the Singapore marker price of Murban futures on the ICE Futures Abu Dhabi exchange, which goes to delivery two months in advance.

"Not sure how high premiums [for medium grades] will be this month. Mid-$3s/b [to Dubai] for UZ or Oman is reasonable," the same trader in Singapore said.

The Middle East sour crude complex weakened considerably in April on the back of sluggish demand cues in Asia, prompting calls for a drop in OSPs by $4/b-$6/b, S&P Global reported earlier.

The Dubai cash/futures spread -- understood to be a key element in OSP calculations -- averaged $3.65/b over April, down from an average of $9.25/b in March, the data showed.

"Let's see how OSPs come out and alternatives [grades] fare," a trader with a South Asian refinery said.

Meanwhile, demand across Asia offered mixed cues with India and South Korea expected to continue in the same vein as last month but China's demand still remains a concern, sources said.

"It seems China's demand still [shows] no sign of resilience yet," the trader with the North Asian refinery said.

The fresh COVID-19 outbreaks in key cities has hampered the country's crude oil import activity over the past several weeks.

However, with the pandemic-related efforts showing signs of progress, market participants are hopeful of an earlier than expected turnaround.

"One thing I'm confident is that China has already controlled the Covid cases," the trader in Singapore said. "Maybe in the latter half of this month [Chinese demand should improve]."