Crude MOC: Benchmark Dubai cash futures flips to premium amid positive demand

New York — The Middle East crude market continued to strengthen Nov. 6, with benchmark Dubai continuing its upward trajectory for the fifth consecutive day on the back of higher demand from Asian refiners.

S&P Global Platts on Nov. 6 assessed January cash Dubai at a premium of 10 cents/b to same-month Dubai futures, up from a discount of 11 cents on Nov. 5, indicating a healthy resurgence in demand for Middle East medium sour barrels.

This was the strongest spread seen since July 24 when the Dubai cash-futures spread was assessed at a 23 cents/b premium, Platts data showed.

Similarly, January cash Oman was assessed 2 cents/b higher day-on-day at a premium of 34 cents/b to same-month Dubai futures -- the highest since Aug. 31.

Both Dubai and Oman have strengthened amid the emergence of demand from Indian refiners as well as expectations of strong demand from Asia's biggest crude oil importer China.

"Oman and Dubai are medium crude oil grades that would typically go to China. Those grades are supported by expectations of new demand from Chinese refiners as they will receive a fresh set of crude oil import quota starting from January 2021...therefore these medium grades are [getting] stronger," said a crude oil trader with a North Asian refiner.

Meanwhile, official selling prices released by Saudi Aramco the previous evening -- in which it cut the prices of three out of five of its Asia-bound grades -- were widely seen as within expectations by Asian market participants.

The December OSPs were within expectations and reflective of changes in the Middle East crude price structure and product margins, traders told Platts Nov. 6.

As there were no surprises with the December OSPs, Asian refiners will likely make minor changes to their term volume nominations for December loading barrels from Aramco, keeping the volume largely similar to November, one trader said.

The Platts Market on Close assessment process on Nov. 6 saw a total of three 25,000 barrel partials changing hands, consisting of two January Dubai partials and a single January Oman partial. Reliance and PetroChina were seen on the sell side, while BP and Total were on the buy side.

The partials trades on Nov. 6 bring the total number of partials traded in November so far to 12, consisting of 10 Dubai partials and two Oman partials.

A convergence occurs when 20 partials are traded between two counterparties, resulting in a full, 500,000 barrel physical cargo being declared from the seller to the buyer.

For Dubai partials, the seller has the option to deliver a Dubai, Oman, Upper Zakum, Al-Shaheen or, with a quality premium, Murban cargo to the buyer.

For Oman partials, the seller has the option to deliver Oman, or, with a quality premium, a Murban cargo to the buyer.